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Navajo County, Arizona : comprehensive annual financial report

Navajo County, Arizona : comprehensive annual financial report 2010

Navajo
County
COMPREHENSIVE ANNUAL FINANCIAL REPORT
Fiscal Year
2009-10
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Comprehensive annual financial report
Year Ended June 30, 2010
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Introductory section
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NAVAJO COUNTY BOARD OF SUPERVISORSSUPERVISORS
Front Row: District 2—Jesse Thompson, District 4—David Tenney, District 1—Jonathan M. Nez
Back Row: District 3—J.R. DeSpain, District 5—Jerry Brownlow
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Comprehensive annual financial report
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Introductory section
Navajo County Board of Supervisors 4
Letter of Transmittal 10
Organization Chart 16
FINANCIAL SECTION
Independent Auditor’s Report 20
Management’s Discussion and Analysis
(Required Supplementary Information) 22
BASIC FINANCIAL STATEMENTS:
Government-Wide Financial Statements:
Statement of Net Assets 32
Statement of Activities 33
Fund Financial Statements:
Balance Sheet - Governmental Funds 34
Reconciliation of the Balance Sheet to the
Statement of Net Assets 35
Statement of Revenues, Expenditures, and Changes
in Fund Balances - Governmental Funds 36
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances to the Statement
of Activities 37
Statement of Revenues, Expenses, and Changes in Fund
Net Assets - Proprietary Funds 38
Statement of Cash Flows - Proprietary Funds 39
Statement of Fiduciary Net Assets - Fiduciary Funds 40
Statement of Changes in Fiduciary Net Assets - Fiduciary Funds 41
Table of Contents
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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Notes to the Financial Statements:
Note 1– Summary of Significant Accounting Policies 42
Note 2– Stewardship, Compliance and Accountability 49
Note 3– Deposits and Investments 50
Note 4– Due From Other Governments 55
Note 5– Capital Assets 56
Note 6– Construction and Other Significant Commitments 57
Note 7– Long-Term Liabilities 58
Note 8– Risk Management 63
Note 9– Operating Leases 65
Note 10– Pensions and Other Postemployment Benefits 66
Note 11– Interfund Balances and Activity 74
Note 12– County Treasurer’s Investment Pool 76
Other Required Supplementary Information:
Budgetary Comparison Schedules
General Fund 80
Public Works/HURF Fund 83
Flood Control District Fund 84
Notes to Budgetary Comparison Schedules 85
Schedule of Agent Retirement Plans’ Funding Progress 86
Combining and Individual Fund Statements and Schedules:
Combining Balance Sheet – Nonmajor Governmental Funds 92
Combining Statement of Revenues, Expenditures, and Changes in
Fund Balances– Nonmajor Governmental Funds 97
Table of Contents
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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Budgetary Comparison Schedules:
Nonmajor Governmental Funds 100
Special Revenue - Administration 102
Special Revenue - County Attorney 103
Special Revenue - Courts 104
Special Revenue - Environmental and Conservation 105
Special Revenue - Housing 106
Special Revenue - Library District 107
Special Revenue - Probation 108
Special Revenue - Public Defense 109
Special Revenue - Public Health 110
Special Revenue - Recreation 111
Special Revenue - Sheriff’s Office 112
Special Revenue - Special Districts 113
Special Revenue - Workforce Investment Act 114
Capital Projects - Special Districts 115
Debt Service - General Government 116
Debt Service - Jail 117
Debt Service - Special Districts 118
Capital Assets Used in the Operation of Governmental Funds:
Comparative Schedules By Source 120
Schedule By Function and Activity 121
Schedule of Changes By Function and Activity 122
Statement of Changes in Assets and Liabilities – Agency Fund 123
Table of Contents
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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Table of Contents
STATISTICAL SECTION
Financial Trends
Net Assets by Component 127
Changes in Net Assets 129
Fund Balances of Governmental Funds 133
Changes in Fund Balances of Governmental Funds 135
Revenue Capacity
Assessed Value and Estimated Actual Value of Taxable Property 137
Direct and Overlapping Tax Rates 138
Principal Property Taxpayers 139
Property Tax Levies and Collections 140
Debt Capacity
Ratios of Outstanding Debt by Type 141
Legal Debt Margin Information 142
Pledged Revenue Coverage 143
Demographic and Economic Information
Demographic and Economic Statistics 144
Employment by Sector/Major Employers 145
Operating Information
Full -Time Equivalent Employees by Function 146
Operating Indicators by Function 147
Capital Asset Statistics by Function 148
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To the Honorable Board of Supervisors and Citizens of Navajo County, Arizona:
We are pleased to provide you the Comprehensive Annual Financial Report (CAFR) for Navajo County for the fiscal year ended June 30, 2010. The CAFR provides in depth information regarding the County’s financial position. Navajo County presents the CAFR prepared in compliance with generally accepted accounting principles and audited using generally accepted auditing standards by the Arizona Office of the Auditor General.
This report consists of management’s representations concerning the finances of Navajo County. Consequently, management assumes full responsibility for the completeness and reliability of the information presented in this report. To provide a reasonable basis for making these representations, management of the County has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for preparation of the County’s financial statements in conformity with generally accepted accounting principles (GAAP). Because the cost of internal controls should not exceed the anticipated benefits, the objective of this framework is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements.
The Arizona Office of the Auditor General has audited the County’s financial statements. The goal of the independent audit was to provide reasonable assurance that the financial statements of the County for the fiscal year ended June 30, 2010 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded based upon the audit; that there was a reasonable basis for rendering an unqualified opinion that the County’s financial statements for the fiscal year ended June 30, 2010 , are fairly presented in conformity with GAAP. The Independent Auditors report is presented at the beginning of the Financial Section of this report.
This report is prepared in accordance with generally accepted accounting principles, in conformance with standards of financial reporting established by the Governmental Accounting Standards Board (GASB), and using the guidelines established by the Government Finance Officers Association of the United States and Canada (GFOA). GAAP requires that management provide an overview and analysis to accompany the basic financial statements, called the Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The MD&A immediately follows the Independent Auditors’ Report in the Financial Section of this report.
Navajo County ADMINISTRATION
W. James Menlove, CPA
Finance Director
James G. Jayne
County manager 11
The Comprehensive Annual Financial Report consists of three sections:
Introductory Section which includes the Letter of Transmittal.
Financial Section which includes the Independent Auditors’ Report, Management’s Discussion and Analysis, basic financial statements, notes to the financial statements, other required supplementary information, and combining and individual fund statements and schedules.
Statistical Section which presents comprehensive statistical data on the County’s financial, economic, and demographic characteristics.
NAVAJO COUNTY PROFILE
Navajo County was formed on March 21, 1895 and encompasses 9,953 square miles. The diversity of Navajo County is evident not only in it’s population but also in its landscape. Northern Navajo County is home to the Navajo and Hopi Tribes, and is known for scenic attractions such as Monument Valley. The middle part of Navajo County is where the county seat is located, in Holbrook. Holbrook became the county seat in 1871. Southern Navajo County is home to the White Mountain Apache Tribe and many picturesque lakes and forests.
The 2009 population of the County was estimated to be 112,975. The principal industries are tourism, coal mining, manufacturing, timber production and ranching.
Navajo County’s government consists of an elected Board of Supervisors. There are five districts with one supervisor representing each district. As governed by statute, the Board of Supervisors is responsible for the overall management and approval of the departmental budgets and tax rates. The Board appoints a County Manager and each department is headed by an elected official, appointed official or a department director. Elected offices are statutorily determined and include the Assessor, Clerk of the Superior Court, Constables, County Attorney, Sheriff, Recorder, Superintendent of Schools, Treasurer and the Judiciary.
Navajo County provides a full range of services including law enforcement and public safety, judicial and detention services, health services, highway construction/maintenance, education and library services.
The financial reporting entity includes all the funds of the primary government and it’s component units. Component units are legally separate entities for which the primary government is financially accountable. Blended component units although legally separate entities, are, in substance part of the County’s operations. Additional information on Navajo County’s blended component units can be found in the notes to the financial statements Note 1.
Navajo County ADMINISTRATION
W. James Menlove, CPA
Finance Director
James G. Jayne
County manager 12
The Board of Supervisors and the County Manager use the financial policies, budget management policies
and strategic priorities to guide the overall development of the budget. On an annual basis, beginning in
January the Finance Department, under the direction of the County Manager, meet with all elected oficials
and department directors and outline the Board’s adopted budget guidelines. Each department must
provide revenue and expenditure estimates for the remainder of the current fiscal year and planned
revenues and expenditures for the following year. These estimates are used by the budget team to assist
in the updating of the five-year financial plan.
The final budget must be adopted by the Board of Supervisors on or before the third Monday in August.
The tax rate and levy must also be set on or before the third Monday in August. The final Adopted Budget
cannot exceed the total of the Tentative Budget.
FACTORS AFFECTING NAVAJO COUNTY’S FINANCIAL CONDITION
The information presented in the financial statements is best understood when it is considered from the
broader perspective of the specific environment within which the County operates.
Local Economy. Navajo County has experienced a 15.9% growth in population from 2000 through 2009.
The major cities and towns in Navajo County account for a large portion of the overall increase.
(information on the 3 tribal lands was not available):
Some of the major employers in Navajo
County include Catalysts (formerly
Abitibi Consolidated) - Snowflake,
Arizona Public Service - Joseph City,
Burlington Northern Santa Fe Railway -
Winslow, Summit Healthcare - Show
Low, and Northland Pioneer College -
Holbrook.
The State of Arizona has been
struggling to balance budget deficits in
the face of declining revenues. All of Arizona’s counties have been impacted by the reduced revenues at
the state and local levels, as well as cost shifts imposed by the state.
Major Cities/Communities 1990 2008 % increase
Show Low 5019 12346 146%
Pinetop-Lakeside 2422 4522 87%
Taylor 2418 4182 73%
Snowflake 3679 5686 55%
Winslow 8190 9833 20%
Holbrook 4686 5083 8%
White Mtn Apache Tribe 10394 N/A
Hopi Tribe 7360 N/A
Kayenta, Navajo Nation 4372 N/A
Source: Arizona Department of Commerce: http://www.census.gov/
Navajo County ADMINISTRATION
W. James Menlove, CPA
Finance Director
James G. Jayne
County manager
13
Navajo County ADMINISTRATION
Long-Term Financial Planning. In November 2006, Navajo County voters approved Proposition 400 which restated the base year expenditure limitation. The expenditure limit is a constraint on the county’s annual spending that was added to the Arizona Constitution in 1980. The limit is based on the county’s actual 1980 expenditures and is adjusted each year for population growth and inflation. Basically, the service level provided in 1980—the base year—is the benchmark for spending on today’s essential services. Navajo County elected officials agreed that the expenditure limit, based on 1980 service levels, was not sufficient to meet the current demand for basic public services.
Proposition 400 allowed the County to restate the base year expenditure limit which allowed for the allocation of resources to:
 Public Safety - Increased law enforcement coverage and availability.
 Transportation - Additional investment in transportation infrastructure.
 Access to Services - Improvement of facilities and satellite offices to provide more accessible government services.
 Quality Work Force - Focus on retention of staff, which reduced training and operational costs as employee turnover was greatly reduced.
The proactive decision making of the Board of Supervisors has allowed Navajo County to better plan for the long-term financial sustainability of the county. Sound fiscal and budget management policies allow the County to better respond to the economic challenges that we face currently and in the future.
Among the current challenges is a significant decline in the three major revenues sources; State Shared Sales Tax, County Sales Tax and General Fund Vehicle License Tax (VLT). Since 2008, State Shared Sales Tax has decreased 18.5%, County Sales Tax by 20% and General Fund VLT by 12.7%.
Impact of State Economic Condition. The downturn in the local economy corresponds to economic declines at the state and national levels. As the State of Arizona struggles to balance their budget and reduce expenses the counties have been significantly impacted by the shifting of revenues away from the County while mandating counties to pay for state programs. The uncertainty of these impacts from year to year requires Navajo County to budget conservatively to handle these cost shifts, reductions in program funding and reduced revenue allocations.
Navajo County continues to work with State Legislators and the County Supervisors Association to find solutions to the state budget crisis with the least impact to counties.
W. James Menlove, CPA
Finance Director
James G. Jayne
County manager 14
Additionally Navajo County continues to seek alternate funding sources to increase revenues. Cost analysis is ongoing and the county is seeking to find ways to further reduce spending while continuing to provide for mandated functions with excellent customer service.
Economic Outlook. Economists are predicting an end to the recession near the end of 2011, with a very modest recovery during 2012. Arizona was among the states hardest hit by the economic downturn with any recovery lagging behind the recovery on a national level. The weakness in the economy and the uncertainty of the state budget requires continual monitoring and planning for Navajo County. We will continue to address these challenges through the strategic budget planning process in coordination with our Elected Officials and Department Directors.
SIGNIFICANT FINANCIAL POLICIES
Navajo County has developed a set of fiscal management policies which guide the budget recommendations. These policies consist of: Operating Budget Policy, Capital Budget Policy, Revenue Policy, Reserve Policy, Debt Policy, and the Budget Management Policy.
The policies have been developed to:
 Provide accountability to the citizens and the Board of Supervisors.
 Provide guidelines for long-term financial stability, enhancing the County’s ability to withstand fiscal fluctuations at the national, state and local levels.
 Provide an overall financial picture of the County as a whole.
 Provide a basis for incorporating long-term policies into day to day operations.
AWARDS
On June 8th 2010, the Government Finance Officers Association Distinguished Budget Presentation Award was presented to the Board of Supervisors for Fiscal Year 2009. We have submitted our 2010 budget for review and anticipate receiving the award for the second consecutive year. To qualify for the award, the County’s budget will be reviewed and judged as a policy document, a fiscal plan, an operations guide and a communication device.
Navajo County ADMINISTRATION
W. James Menlove, CPA
Finance Director
James G. Jayne
County manager 15
ACKNOWLEDGMENTS
Preparation of this report could only be accomplished through the coordinated efforts of the staff of the Finance Department, the cooperative and willing assistance provided by our Elected Officials and Department Directors and the competent service of the Arizona Office of the Auditor General.
We wish to thank the Navajo County Board of Supervisors for their leadership and commitment to Navajo County and our citizens.
Respectfully submitted,
___________________________________ ____________________________________
James G. Jayne James Menlove, CPA
County Manager Finance Director
Navajo County ADMINISTRATION
W. James Menlove, CPA
Finance Director
James G. Jayne
County manager Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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Voters
NAVAJO COUNTY
BOARD OF SUPERVISORS
County Manager
Administration
Legal Defender
Information
Technology Director
Facilities
Management
Director
Clerk of the Board
of Supervisors
Public Works
Director
Public Defender
Human Resources
Director
Workforce
Investment Act
Executive Director
Library District
Director
Finance Director
Elections Director
Public Fiduciary
Health Director
Presiding Judge
Judicial Branch
Justice of the Peace
Winslow Justice
Court
Juvenile Director
Judicial Branch
Justice of the Peace
Pinetop Justice
Court
Justice of the Peace
Snowflake Justice
Court
Superior Court Judge
Judicial Branch
Chief Probation
Officer
Judicial Branch
Court Administrator
Superior Court
Superior Court
Judge
Judicial Branch
Justice of the Peace
Holbrook Jjustice
Court
Justice of the Peace
Show Low Justice
Court
Justice of the Peace
Kayenta Justice
Court
Superior Court Judge
Judicial Branch
County Attorney
County Assessor
County Sheriff
Clerk of the Court
County Recorder
Superintendent of
Schools
County Treasurer
Constable
Holbrook
Constable
Snowflake
Constable
Kayenta
Constable
Winslow
Constable
Show Low
Constable
Pinetop
North Eastern
Arizona Training
Center Manager
Assistant County
Manager
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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Jonathan M. Nez
District 1
Jesse Thompson
District 2
J.R. DeSpain
District 3
David Tenney
District 4
Jerry Brownlow
District 5
James G. Jayne
County Manager
E.L. “Dusty” parsons
Assistant County Manager
James Menlove, Finance Director M a ry Jane Springer, Deputy Finance Director Cris Parisot, Senior Accountant
Prepared by Navajo County Finance Department
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Comprehensive annual financial report
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FINANCIAL section
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Management’s Discussion and Analysis
As management of Navajo County, we offer readers of Navajo County’s financial statements this narrative overview and analysis of the financial activities of Navajo County for the fiscal year ended June 30, 2010. We encourage readers to consider the information presented here in conjunction with the financial statements.
Financial Highlights
 The assets of the County exceeded its liabilities at the close of the current fiscal year by $105.3 million (net assets). Of this amount, $16.2 million (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors.
 The total decrease in the County’s net assets was $2.5 million in fiscal year 2010.
 At the close of fiscal year 2010, the County’s governmental funds reported combined ending fund balances of $41.4 million, an increase of $2.5 million in comparison with the prior year’s balances of $38.9 million. Approximately 97.9 percent of the fund balances, $40.5 million, is unreserved fund balances available for spending at the County’s discretion.
 At the end of the current fiscal year, unreserved fund balances for the general fund were $7.4 million, or 20.2 percent, of total general fund expenditures.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the County’s basic financial statements. The County’s basic financial statements comprise three components:
1. Government-wide financial statements,
2. Fund financial statements, and
3. Notes to the financial statements.
This report also contains other required supplementary information in addition to the basic financial statements.
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR 23
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR
Government-wide financial statements
The government-wide financial statements are designed to provide readers with a broad overview of the County’s finances in a manner similar to a private sector business.
One of the most important questions asked about the County’s finances is, ―Is the County as a whole better off or worse as a result of this year’s activities?‖ The Statement of Net Assets and the Statement of Activities report information about the County as a whole and about its activities in a way that helps answer this question. These statements include all nonfiduciary assets and liabilities using the accrual basis of accounting.
The Statement of Net Assets presents information on all of the County’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the County is improving or deteriorating. In addition to this change, other nonfinancial factors will need to be considered.
The Statement of Activities presents information showing how net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Therefore, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation leave.
All of the County’s basic services are considered to be governmental activities, including general government, public safety, highways and streets, health and welfare, culture and recreation, education, environmental and conservation, and urban redevelopment and housing. Sales taxes, property taxes, intergovernmental revenues, and user fees finance most of these activities. The government-wide financial statements can be found on pages 32 through 33 of this report. 24
Fund financial statements
The fund financial statements provide detailed information about the most significant county funds—not the County as a whole. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Some funds are required to be established by state law or by bond covenants. However, the Board of Supervisors established many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money. All of the County’s funds can be divided into three categories: governmental, proprietary and fiduciary.
Governmental funds—Most of the County’s basic services are reported in governmental funds, which focus on near-term inflows and outflows of spendable resources and the balances of spendable resources available at year-end. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the County’s operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the County’s programs.
Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for the governmental funds with similar information presented for the governmental activities in the government-wide financial statements. Reconciliations between governmental activities as reported in the Statement of Net Assets and the Statement of Activities and the governmental funds as reported in the fund financial statements are provided to facilitate this comparison.
The County maintains numerous individual governmental funds. Information is presented separately in the governmental funds balance sheets and in the governmental funds statements of revenues, expenditures, and changes in fund balances for the General Fund, Public Works/HURF Fund, and the Flood Control District Fund, which are considered major funds. Data from the other governmental funds is combined into a single aggregated presentation. The governmental fund financial statements can be found on pages 34 through 37 of this report.
Proprietary funds—The County uses one type of proprietary fund, an internal service fund, to account for self-insured employee benefits provided to county departments on a cost-reimbursement basis. At the beginning of the year, the County transferred the assets and liabilities of the internal
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR 25
service fund to the General Fund because the County terminated the self-insured employee benefits trust when it joined a pooled trust to provide these benefits. The proprietary fund financial statements can be found on pages 38 and 39 of this report. Also, see Note 8 - Risk management for more information.
Fiduciary funds—Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the County’s programs. The fiduciary funds financial statements can be found on pages 40 through 41 of this report.
Notes to the financial statements—The notes to the financial statements provide additional information that is essential to fully understand the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 42 through 77 of this report.
Required supplementary information—In addition to the basic financial statements and accompanying notes, the report presents required supplementary information on the County’s budgeting and budgetary control and the County’s progress in funding its obligation to provide pension benefits to its employees. Other required supplementary information can be found on pages 80 through 88 of this report.
Other information—The combining statements in connection with nonmajor governmental funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules including statistical information can be found on pages 89 through 148 of this report.
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR
Government-wide Financial Analysis
Net Assets
Net assets may serve over time as a useful indicator of a County’s financial position. The following table reflects the condensed Statement of Net Assets of the County as of June 30, 2010, compared to the prior year. 26
The County’s net assets from governmental activities at the end of the fiscal year were $105.3 million. The decrease of $2.5 million is primarily due to a net reduction in capital assets.
A large portion of the County’s net assets, 62.7 percent ($66.0 million), reflects its investment in capital assets net of accumulated depreciation and related debt. The County uses these assets to provide services to citizens and, therefore, they are not available for future spending.
21.9 percent of the County’s net assets ($23.0 million) are subject to external restrictions on how they may be used. The County’s restricted net assets increased by 21.0 percent ($4.0 million) in the current fiscal year due to revenues exceeding expenditures in the Public Works/HURF and Flood Control District Funds in the current fiscal year.
The remaining balance of the County’s net assets, 15.4 percent ($16.2 million), is unrestricted and may be used to meet the County’s ongoing obligations to citizens and creditors without constraints established by debt covenants or other legal requirements.
Governmental Activities
2010
2009
Current and other assets
$ 45,374,572
$ 44,391,020
Capital assets
78,655,616
82,838,534
Total assets
124,030,188
127,229,554
Other liabilities
3,410,645
3,345,524
Long-term liabilities outstanding
15,339,191
16,107,326
Total liabilities
18,749,836
19,452,850
Net Assets:
Invested in capital assets, net of related debt
66,038,408
73,728,006
Restricted
23,034,928
19,040,878
Unrestricted
16,207,016
15,007,820
Total net assets
$105,280,352
$107,776,704
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR 27
Change in Net Assets
The Statement of Activities presents information on how the County’s net assets changed during the most current fiscal year. The following table reflects the condensed Statement of Activities of the County for the fiscal year 2010 compared to the prior year:
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR
Overall revenues decreased by 2.3 percent and program expenses increased by 6.0 percent in the current fiscal year.
Governmental Activities
2010
2009
Program revenues:
Charges for services
$ 4,303,509
$ 4,360,848
Operating grants and contributions
13,539,596
15,300,801
Capital grants and contributions
15,637,667
12,393,158
Total program revenues
33,480,772
32,054,807
General revenues:
Property taxes
12,494,737
10,933,578
Sales taxes
5,480,598
6,330,588
State shared revenues
10,728,725
12,017,517
Grants and contributions not restricted to specific programs
4,902,289
6,444,858
Investment earnings
322,748
750,742
Gain on disposal of capital assets
115,237
23,895
Miscellaneous
1,273,310
1,466,751
Transfers
(380,236)
-
Total general revenues and transfers
34,937,408
37,967,929
Total revenues
68,418,180
70,022,736
Governmental Activities
2010
2009
Program expenses:
General government
$ 22,647,297
$ 19,392,043
Public safety
17,566,896
19,182,119
Highways and streets
13,057,318
14,058,305
Health and welfare
9,366,578
7,219,915
Culture and recreation
747,065
510,035
Education
6,307,885
5,723,104
Environmental and conservation
237,032
231,225
Urban redevelopment and housing
307,208
-
Interest on long-term debt
677,253
594,260
Total program expenses
70,914,532
66,911,006
Change in net assets
(2,496,352)
3,111,730
Net assets, beginning
107,776,704
104,664,974
Net assets, ending
$105,280,352
$107,776,704 28
Operating grants and contributions decreased by $1.8 million, or 11.5 percent, in the current year due to a decrease in general fund state government grants.
Capital grants and contributions increased by $3.2 million, or 26.2 percent, in the current year due to construction of the Lone Pine Dam Bridge and an intergovernmental agreement with the Navajo Nation for construction of road yard facilities.
Property taxes increased by $1.6 million, or 14.3 percent, due to the increase in assessed valuation and increase in levy as allowed by statute.
Local sales taxes decreased by $0.8 million, or 13.4 percent, due to the poor economic conditions.
State shared revenues decreased by $1.3 million, or 10.7 percent, in the current year due to the recession and general economic downturn in the national and state economies.
Grants and contributions not restricted to specific programs decreased by $1.5 million, or 23.9 percent, in the current year due to a decrease in federal grant revenues.
General government expenses increased by $3.3 million, or 16.8 percent, in the current fiscal year due to the County discontinuing the self-funded health insurance trust and participating in the Arizona Public Employers Health Pool in the current year.
Health and welfare expenses increased by $2.1 million, or 29.7 percent, in the current fiscal year due to the construction of a Public Health Services District facility in the southern part of the county.
Financial Analysis of the County’s Funds
The County reported three major funds for this fiscal year: the General Fund, Public Works/HURF Fund, and the Flood Control District Fund. At year-end, the County’s governmental funds reported combined fund balances of $41.4 million, which is an increase of $2.5 million from last year or a change of 6.4 percent. Of the total, $40.5 million constitutes unreserved fund balances.
Revenues for governmental functions overall decreased by $1.8 million from last year, a decrease of 2.6 percent, and expenditures for governmental functions decreased by about $8.8 million from last year, a decrease of 11.7 percent in the current fiscal year. Governmental function revenues exceeded expenditures by $1.1 million in the current fiscal year.
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR 29
The General Fund is the County’s primary operating fund. At the end of the current fiscal year, the unreserved fund balances of the General Fund totaled $7.4 million. Unreserved fund balances represents 20.2 percent of total General Fund expenditures. This ratio indicates a strong fund balance position in comparison to expenditures. The General Fund’s unreserved fund balances decreased by $.1 million from last year, a decrease of 1.8 percent in the current fiscal year. The primary factor for the decrease was due to declining economic conditions.
The Public Works/HURF Fund’s fund balances increased by $4.9 million from last year, an increase of 65.4 percent in the current fiscal year. The primary factor for the increase was due to the delay of certain capital improvement projects.
The Flood Control District Fund’s fund balance increased by $1.7 million from last year, or 24.0 percent, in the current fiscal year. The primary factor for the increase was due to revenues exceeding expenditures. The County is accumulating financial resources for the future rehabilitation of the Winslow levy and other planned flood control projects.
General Fund Budgetary Highlights
For the General Fund, actual revenues were less than the original and final budget amounts by $.3 million while the actual expenditures were $11.1 million less than the amount budgeted. The budget variance for expenditures in the General Fund was primarily due to conservative budgeting practices and reduced spending due to declining economic conditions.
Capital Assets and Debt Administration
Capital Assets
During the current fiscal year, the net book value of capital assets being depreciated decreased by $4.3 million. Additional information on capital assets can be found in Notes 5 and 6 on pages 56 and 57 of this report.
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR 30
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR
Debt Administration
At the end of the current fiscal year, the County had total long-term liabilities outstanding of $15.3 million, which included certificates of participation outstanding of $5.0 million that financed the construction of jail facilities and $6.3 million in revenue bonds that financed the acquisition, construction, and improvements of county buildings and facilities. Included in long-term liabilities is $1.5 million of special assessment debt with governmental commitment and $2.5 million for the future payment of compensated absences for unused employee vacation and sick leave. The remainder of the long-term liabilities consists of capital leases, and estimated landfill closure and post-closure care costs. There were no significant changes to the County’s credit ratings or debt limitations during the current fiscal year. Additional information on long-term debt can be found in Note 7 on pages 58 through 62 of this report.
Economic Factors and Next Year’s Budget
There has been a significant downturn in the national and state economy beginning in the latter part of 2008. Certain economists are predicting an end to the recession at the end of 2011 with a very modest recovery during 2012. The County remains in a strong financial position and has adequate cash reserves. The County continues to closely monitor revenues and applicable economic indicators to ensure that the County remains fiscally strong. The County continues to budget conservatively for revenue estimates and other factors affecting the County.
Requests for Information
This financial report is designed to provide a general overview of the County’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Navajo County Finance Department, P.O. Box 668, 100 Code Talker Drive, Holbrook, AZ 86025.
Navajo County
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Basic financial statements
Navajo County
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Governmental
Activities
Assets
Cash and investments $ 37,853,647
Cash and investments held by trustee 1,276,107
Receivables (net of allowance for uncollectibles):
Property taxes 764,062
Accrued interest 50,785
Due from other governments 4,202,087
Inventories 528,878
Prepaid items 45,569
Restricted assets:
Cash and investments held by trustee 653,437
Capital assets, not being depreciated 12,104,757
Capital assets, being depreciated, net 66,550,859
Total assets 124,030,188
Liabilities
Accounts payable 2,321,277
Accrued payroll and employee benefits 1,069,944
Due to other governments 19,424
Noncurrent liabilities
Due within 1 year 2,836,470
Due in more than 1 year 12,502,721
Total liabilities 18,749,836
Net Assets
Invested in capital assets, net of related debt 66,038,408
Restricted for:
Highways and streets 12,132,684
Public safety 8,575,954
Debt service 1,924,862
Capital projects 401,428
Unrestricted 16,207,016
Total net assets $ 105,280,352
Statement of Net Assets
See accompanying notes to financial statements
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Program Revenues Net (Expense)
Operating Capital Revenue and
Charges for Grants and Grants and Changes in
Functions/Programs Expenses Services Contributions Contributions Net Assets
Primary government:
Governmental activities:
General government $22,647,297 $3,531,064 $1,735,327 ($17,380,906)
Public safety 17,566,896 517,702 3,290,457 (13,758,737)
Highways and streets 13,057,318 39,249 $15,637,667 2,619,598
Health and welfare 9,366,578 215,494 1,803,890 (7,347,194)
Culture and recreation 747,065 122,207 (624,858)
Education 6,307,885 6,086,494 (221,391)
Environmental and conservation 237,032 195,574 (41,458)
Urban redevelopment and housing 307,208 305,647 (1,561)
Interest on long-term debt 677,253 (677,253)
Total governmental activities $70,914,532 $4,303,509 $13,539,596 $15,637,667 ($37,433,760)
General revenues:
Property taxes, levied for general purpose $6,464,630
2,742,387
2,148,297
Property taxes, levied for library district 547,247
Property taxes, levied for white mountain lake recreation district 154,333
Property taxes, levied for special districts 437,843
General county sales tax 5,480,598
Shared revenues - state sales tax 8,732,190
Shared revenues - state vehicle license tax 1,996,535
Grants and contributions not restricted to specific programs 4,902,289
Investment earnings 322,748
Gain on disposal of capital assets 115,237
Miscellaneous 1,273,310
Transfers (380,236)
Total general revenues and transfers 34,937,408
Change in net assets (2,496,352)
107,776,704
Net assets, June 30, 2010 $105,280,352
Net assets, July 1, 2009
Statement of Activities
Taxes:
Property taxes, levied for flood control
Property taxes, levied for public health district
See accompanying notes to financial statements
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Flood Other Total
General Public Works/ Control Governmental Governmental
Fund HURF Fund District Fund Funds Funds
$4,338,628 $12,011,967 $8,839,545 $12,663,507 $37,853,647
325,096 951,011 1,276,107
339,455 189,026 235,581 764,062
7,370 14,459 10,285 18,671 50,785
2,426,916 274,479 256,992 2,958,387
1,822,446 970,639 1,409,002 4,202,087
528,878 - 528,878
45,569 45,569
653,437 653,437
$9,259,911 $13,800,422 $9,038,856 $16,233,770 $48,332,959
$545,855 $1,236,837 $20,088 $518,497 $2,321,277
693,559 132,000 7,749 236,636 1,069,944
19,424 - - 19,424
6,001 - 274,479 2,677,907 2,958,387
252,986 135,678 184,992 573,656
1,517,825 1,368,837 437,994 3,618,032 6,942,688
528,878 528,878
325,096 325,096
7,416,990 7,416,990
Special revenue funds 11,902,707 8,600,862 10,614,544 31,118,113
Capital projects funds 76,332 76,332
Debt service funds 1,924,862 1,924,862
7,742,086 12,431,585 8,600,862 12,615,738 41,390,271
$9,259,911 $13,800,422 $9,038,856 $16,233,770 $48,332,959
Cash and investments
Assets
Balance Sheet
Governmental Funds
Prepaid items
Cash and investments held by trustee
Receivables:
Property taxes
Accrued interest
Due from other funds
Inventories
Due from other governments
Total liabilities
Restricted assets:
Cash and investments held by trustee
Total assets
Liabilities and Fund Balances
Liabilities:
Accounts payable
Accrued payroll and employee benefits
Due to other governments
Due to other funds
Deferred revenues
Fund balances:
Reserved for inventories
Reserved for capital projects
Unreserved, reported in:
General Fund
Total fund balances
Total liabilities and fund balances
See accompanying notes to financial statements
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Fund balances—total governmental funds $ 41,390,271
Amounts reported for governmental activities in the Statement of Net Assets are different
because:
Capital assets used in governmental activites are not
financial resources and therefore, are not reported in the
funds. 78,655,616
Some receivables are not available to pay for current-period
expenditures and therefore, are deferred in the funds. 573,656
Some liabilities, including bonds and certificates of participation payable,
are not due and payable in the current period and therefore are not
reported in the funds. (15,339,191)
Net assets of governmental activities $ 105,280,352
Reconciliation of the Balance Sheet to the Statement of Net Assets
Governmental Funds
See accompanying notes to financial statements
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See accompanying notes to financial statements
Flood Other Total
General Public Works/ Control Governmental Governmental
Fund HURF Fund District Fund Funds Funds
Revenues:
Property taxes $6,397,385 $2,742,386 $3,154,537 $12,294,308
Licenses and permits 454,494 165,169 619,663
Fines and forfreits 1,087,357 249,245 1,336,602
Intergovernmental 20,545,394 $15,032,384 14,074,675 49,652,453
Charges for services 1,012,452 39,249 1,295,544 2,347,245
Investment earnings 76,000 81,289 66,694 98,764 322,747
Special assessments 133,181 133,181
Contributions 31,141 31,141
Miscellaneous 519,338 235,037 518,936 1,273,311
Total revenues 30,092,420 15,387,959 2,809,080 19,721,192 68,010,651
Expenditures:
Current:
General government 18,130,072 3,531,680 21,661,752
Public safety 12,226,372 817,477 3,794,278 16,838,127
Highways and streets 9,888,985 198,844 10,087,829
Health and welfare 3,271,809 6,034,991 9,306,800
Culture and recreation 740,591 740,591
Education 323,717 5,815,346 6,139,063
Environmental and conservation 237,032 237,032
Urban redevelopment and housing 307,208 307,208
Debt service:
Principal 858,416 858,416
Interest and other charges 677,253 677,253
Capital outlay 81,675 81,675
Total expenditures 34,033,645 9,888,985 817,477 22,195,639 66,935,746
Excess (deficiency) of revenues over expenditures (3,941,225) 5,498,974 1,991,603 (2,474,447) 1,074,905
Other financing sources (uses):
Sale of capital assets 95,036 20,201 115,237
Transfers in 3,873,834 142,240 4,032,407 8,048,481
Transfers out (2,718,933) (787,506) (327,996) (2,955,167) (6,789,602)
Total other financing sources and uses 1,249,937 (625,065) (327,996) 1,077,240 1,374,116
Net change in fund balances (2,691,288) 4,873,909 1,663,607 (1,397,207) 2,449,021
Fund balances, July 1, 2009 10,433,374 7,516,396 6,937,255 14,012,945 38,899,970
Increase in reserve for inventories 41,280 41,280
Fund balances, June 30, 2010 $7,742,086 $12,431,585 $8,600,862 $12,615,738 $41,390,271
Statement of Revenues, Expenditures, and Changes in Fund Balances
Governmental Funds
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See accompanying notes to financial statements
Net change in fund balances—total governmental funds $ 2,449,021
Amounts reported for governmental activities in the Statement of Activities are
different because:
Governmental funds report capital outlays as expenditures. However, in the
Statement of Activities the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense.
Capital outlay 1,768,636
Depreciation expense (5,421,547) (3,652,911)
Collections of revenues in governmental funds exceeded revenues reported in the
Statement of Activities (462,762)
Debt proceeds provide current financial resources to governmental funds, but
issuing debt increases long-term liabilities in the Statement of Net Assets.
Repayment of debt principal is an expenditure in the governmental funds
but the repayment reduces long-term liabilities in the Statement of Net Assets.
Principal repaid 858,416
Under the modified accrual basis of accounting used in the governmental funds,
expenditures are not recognized for transactions that are not normally paid with
expendable available resources. In the Statement of Activities, however, which is
presented on the accrual basis of accounting, expenses are reported
regardless of when the financial resources are available.
Increase in compensated absences (91,005)
Decrease in landfill closure and post-closure care costs 724 (90,281)
Some cash outlalys, such as purchases of inventories, are reported as expenditures
in the governmental funds when purchased. In the Statement of Activities, however,
they are reported as expenses when consumed.
Increase in inventories 41,280
Net transfers of the internal service funds assets and liabilities are
reported in the governmental funds to record the close-out of the fund during the year. (1,639,115)
Change in net assets of governmental activities $ (2,496,352)
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances to the Statement of Activities
Governmental Funds
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See accompanying notes to financial statements
Governmental
Activities -
Internal Service Fund
Transfers in (out):
Transfers in $ 550,000
Transfers out (2,189,115)
Net transfers out (1,639,115)
Decrease in net assets (1,639,115)
Net Assets, July 1, 2009 1,639,115
Net Assets, June 30, 2010 $ -
Statement of Revenues, Expenditures, and Changes in Fund Net Assets
Proprietary Funds
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See accompanying notes to financial statements
Governmental
Activities -
Internal Service Fund
Cash flows from noncapital financing activities:
Cash transfers to other funds $ (2,187,577)
Net cash used by noncapital financing activities (2,187,577)
Net decrease in cash and cash equivalents (2,187,577)
Cash and cash equivalents, July 1, 2009 2,187,577
Cash and cash equivalents, June 30, 2010 -
Schedule of Noncash Investing, Capital and Noncapital Activities
Transfer out of accrued interest to General Fund 1,538
Accrued interest transferred to General Fund (1,538)
Claims payable transferred to General Fund 550,000
Transfer of claims payable to General Fund (550,000)
Net total $ -
Statement of Cash Flows
Proprietary Funds
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See accompanying notes to financial statements
Investment Trust
Funds Agency Funds
Cash and investments $ 105,297,219 $ 4,434,108
167,670 20,876
$ 105,464,889 $ 4,454,984
$ 3,717,744
737,240
$ 4,454,984
Held in trust for investment trust particpants $ 105,464,889
Statement of Fiduciary Net Assets
Fiduciary Funds
Assets
Total assets
Interest receivable
Liabilities
Due to other governments
Deposits held for others
Total liabilities
Net Assets
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See accompanying notes to financial statements
Investment Trust
Funds
$ 245,347,579
778,759
246,126,338
228,602,614
17,523,724
87,941,165
$ 105,464,889
Statement of Changes in Fiduciary Net Assets
Fiduciary Funds
Additions:
Contributions from participants
Net investment income
Net assets, July 1, 2009
Net assets, June 30, 2010
Total additions
Deductions:
Distributions to participants
Change in net assets
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Note 1 - Summary of Significant Accounting Policies
The accounting policies of Navajo County conform to generally accepted accounting
principles applicable to governmental units adopted by the Governmental Accounting
Standards Board (GASB).
For the year ended June 30, 2010, the County implemented the provision of GASB
Statement No. 51, Accounting and Financial Reporting for Intangible Assets. GASB
Statement No. 51 establishes accounting and financial reporting requirements for
intangible assets. The implementation of this Statement did not have a material effect
on the County’s financial statements.
A. Reporting Entity
The County is a general purpose local government that is governed by a separately
elected board of five county supervisors. The accompanying financial statements
present the activities of the County (the primary government) and its component units.
Component units are legally separate entities for which the County is considered to be
financially accountable. Blended component units, although legally separate entities,
are in substance part of the County’s operations. Therefore, data from these units is
combined with data of the primary government. Discretely presented component units,
on the other hand, are reported in a separate column in the government-wide financial
statements to emphasize they are legally separate from the County. Each blended
component unit discussed below has a June 30 year-end. The County has no discretely
presented component units.
Notes to Financial Statements
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Notes to Financial Statements
Component Unit
Description; Criteria for Inclusion
Reporting
Method
For Separate
Financial
Statements
Navajo County
Flood Control
District
A tax-levying district that provides flood
control systems; the County’s Board of
Supervisors serves as the board of
directors
Blended
Not available
Navajo County
Library District
A tax-levying district that provides and
maintains library services for the County’s
residents; the County’s Board of
Supervisors serves as the board of
directors
Blended Not available
Navajo County
Health District
A tax-levying district that provides health
services for the County’s residents; the
County’s Board of Supervisors serves as
the board of directors
Blended Not available
White Mountain
Lake Recreation
District
A tax-levying district that provides for
recreational services for the White
Mountain Lake Community; the County’s
Board of Supervisors serves as the board
of directors
Blended Not available
Navajo County
Municipal Property
Corporation
A nonprofit corporation that assists in the
acquisition of tangible real and personal
property; exists only to serve the County
Blended Not available
Navajo County
Special
Assessment
Districts
Legally separate entities that provide
improvements to various properties within
the County; the County’s Board of
Supervisors serves as the board of
directors
Blended Not available
The following table describes the County’s component units:
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Notes to Financial Statements
The Navajo County Municipal Property Corporation was formed to finance the construction
of the Navajo County Jail Facility. Because the County’s Board of Supervisors serves as
the Board of Directors for this corporation, it is reported as a blended component unit of the
County. The Corporation issued certificates of participation that evidenced undivided
proportionate interests in rent payments to be made under a lease agreement, with an
option to purchase, between Navajo County and the Corporation. Since this debt is in
substance the County’s obligation, these liabilities and resulting assets are reported in the
government-wide statement of net assets.
B. Basis of Presentation
The basic financial statements include both government-wide statements and fund financial
statements. The government-wide statements focus on the County as a whole, while the
fund financial statements focus on major funds. Each presentation provides valuable
information that can be analyzed and compared between years and between governments
to enhance the usefulness of the information.
Government-wide statements—Provide information about the primary government (the
County) and its component units. The statements include a statement of net assets and a
statement of activities. These statements report the financial activities of the overall
government, except for fiduciary activities. Governmental activities generally are financed
through taxes and intergovernmental revenues.
A statement of activities presents a comparison between direct expenses and program
revenues for each function of the County’s governmental activities. Direct expenses are
those that are specifically associated with a program or function and, therefore, are clearly
identifiable to a particular function. The County allocates indirect expenses to the Public
Works/HURF and Flood Control District funds. Program revenues include:
 charges to customers or applicants for goods, services, or privileges provided,
 operating grants and contributions, and
 capital grants and contributions, including special assessments.
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Notes to Financial Statements
Revenues that are not classified as program revenues, including internally dedicated
resources and all taxes, are reported as general revenues.
Generally, the effect of interfund activity has been eliminated from the government-wide
financial statements to minimize the double-counting of internal activities. However,
charges for interfund services provided and used are not eliminated if the prices
approximate their external exchange values.
Fund financial statements—Provide information about the County’s funds, including
fiduciary funds and blended component units. Separate statements are presented for the
governmental and fiduciary fund categories. The emphasis of fund financial statements is
on major governmental funds, each displayed in a separate column. All remaining
governmental funds are aggregated and reported as other governmental funds. Fiduciary
funds are aggregated and reported by fund type.
The County reports the following major governmental funds:
The General Fund is the County’s primary operating fund. It accounts for all financial
resources of the general government, except those required to be accounted for in another
fund.
The Public Works/HURF Fund is used to account for road construction and maintenance of
major and nonmajor regional roads, and is funded by highway user revenues and vehicle
license taxes.
The Flood Control District Fund is used to provide flood control facilities and regulates
floodplains and drainage to prevent flooding of property in Navajo County and is funded by
secondary property taxes.
The County reports the following fund types:
The internal service fund accounts for self-insured employee benefits provided to county
departments on a cost-reimbursement basis.
The investment trust funds account for pooled assets held and invested by the County
Treasurer on behalf of other governmental entities.
The agency funds account for assets held by the County in a fiduciary capacity or as an
agent for individuals, private organizations, the State and various local governments.
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Notes to Financial Statements
C. Basis of Accounting
The government-wide, proprietary fund, and fiduciary fund financial statements are
presented using the economic resources measurement focus, with the exception of
agency funds, and the accrual basis of accounting. The agency funds are custodial in
nature and do not have a measurement focus. Revenues are recorded when earned and
expenses are recorded at the time liabilities are incurred, regardless of when the related
cash flows take place. Property taxes are recognized as revenue in the year for which they
are levied. Grants and donations are recognized as revenue as soon as all eligibility
requirements the provider imposed have been met.
Governmental funds in the fund financial statements are reported using the current
financial resources measurement focus and the modified accrual basis of accounting.
Under this method, revenues are recognized when they become both measurable and
available. The County considers all revenues reported in the governmental funds to be
available if the revenues are collected within 60 days after year-end. The County’s major
revenue sources that are susceptible to accrual are property taxes, intergovernmental, and
charges for services. Expenditures are recorded when the related fund liability is incurred,
except for principal and interest on general long-term debt, claims and judgments,
compensated absences, and landfill closure and postclosure care costs, which are
recognized as expenditures to the extent they are due and payable. General capital asset
acquisitions are reported as expenditures in governmental funds. Issuances of general
long-term debt and acquisitions under capital lease agreements are reported as other
financing sources.
Under the terms of grant agreements, the County funds certain programs by a combination
of grants and general revenues. Therefore, when program expenses are incurred, there
are both restricted and unrestricted net assets available to finance the program. The
County applies grant resources to such programs before using general revenues.
The County’s internal service fund follows FASB Statements and Interpretations issued on
or before November 30, 1989, Accounting Principles Board Opinions, and Accounting
Research Bulletins, unless those pronouncements conflict with GASB pronouncements.
The County has chosen the option not to follow FASB Statements and Interpretations
issued after November 30, 1989.
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Notes to Financial Statements
D. Cash and Investments
For the purposes of its statement of cash flows, the County considers cash on hand,
demand deposits, cash on deposit with the County Treasurer, and only those highly liquid
investments with a maturity of 3 months or less when purchased to be cash equivalents.
Nonparticipating interest-earning investment contracts are stated at cost. Money market
investments and participating interest-earning investment contracts with a remaining
maturity of 1 year or less at time of purchase are stated at amortized cost. All other
investments are stated at cost, which approximates fair value.
E. Inventories
The County accounts for its inventories in the governmental funds using the purchase
method. Inventories of the governmental funds consist of expendable supplies held for
consumption and are recorded as expenditures at the time of purchase. Amounts on hand
at year-end are shown on the balance sheet as an asset for informational purposes only
and are offset by a fund balance reserve to indicate that they do not constitute ―available
spendable resources.‖ These inventories are stated at cost using the first-in, first-out
method.
Inventories in the government-wide financial statements are recorded as assets when
purchased and expensed when consumed. These inventories are stated at cost using the
first-in, first-out method.
F. Property Tax Calendar
The County levies real and personal property taxes on or before the third Monday in August
that become due and payable in two equal installments. The first installment is due on the
first day of October and becomes delinquent after the first business day of November. The
second installment is due on the first day of March of the next year and becomes delinquent
after the first business day of May.
A lien assessed against real and personal property attaches on the first day of January
preceding assessment and levy.
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Notes to Financial Statements
H. Investment Earnings
Investment earnings is composed of interest and dividends.
I. Compensated Absences
Compensated absences payable consists of unused annual and sick leave. Employees may
accumulate up to 488 hours during a calendar year (depending on years of service) with a
maximum carryforward of 320 hours as of December 31 of each year. Upon termination of
employment, all unused vacation benefits up to a maximum of 320 hours (488 upon
retirement) are paid to the employee. Employees may accumulate an unlimited number of
sick leave hours. Generally, sick leave benefits provide for ordinary sick pay and are
cumulative. Upon retirement or death, employees who have accumulated 301 hours or
more of unused sick leave and have 5 or more years of continuous service will receive a
partial sick leave payment, not to exceed $5,000, based on the number of years of
continuous service. Accordingly, annual and vested sick leave benefits are accrued as a
liability in the government-wide financial statements. A liability for these amounts is reported
in the governmental funds’ financial statements only if they have matured, for example, as a
result of employee resignations and retirements by fiscal year-end.
Capitalization
Threshold
Depreciation
Method
Estimated
Useful Life
Land $10,000 N/A N/A
Buildings and improvements 10,000 Straight-line 15-40 years
Machinery and equipment 5,000 Straight-line 3-7 years
Infrastructure 10,000 Straight-line 35 years
G. Capital Assets
Capital assets are reported at actual cost or estimated historical cost if historical records are
not available. Donated assets are reported at estimated fair value at the time received.
Capitalization thresholds (the dollar values above which asset acquisitions are added to the
capital asset accounts), depreciation methods, and estimated useful lives of capital assets
reported in the government-wide statements are as follows:
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Notes to Financial Statements
Note 2 - Stewardship, Compliance, and Accountability
Deficit fund balances—At June 30, 2010, the following funds reported deficit fund bal-ances,
which violate state statutes. The following funds had fund deficits in excess of
$20,000:
These fund deficits resulted either from operations or a carryover deficit from prior
years, but are expected to be corrected through normal operations or through general
fund operating transfers in future years.
Fund Deficit
Governmental Funds:
Special Revenue:
Housing $72,047
Workforce Investment 193,764
Capital Projects:
General Government 122,528
Debt Service:
Special Districts 107,644
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Notes to Financial Statements
Note 3 - Deposits and Investments
Arizona Revised Statutes (A.R.S.) authorize the County to invest public monies in the
State Treasurer’s investment pool; obligations issued or guaranteed by the United
States or any of the senior debt of its agencies, sponsored agencies, corporations,
sponsored corporations, or instrumentalities; specified state and local government
bonds; interest earning investments such as savings accounts, certificates of deposit,
and repurchase agreements in eligible depositories; and specified commercial paper,
bonds, debentures, and notes issued by corporations organized and doing business in
the United States. In addition, the County Treasurer may invest trust funds in fixed
income securities of corporations doing business in the United States or District of
Columbia.
Credit risk
Statutes have the following requirements for credit risk:
1. Commercial paper must be rated P1 by Moody’s investors service or A1 or better
by Standard and Poor’s rating service.
2. Corporate bonds, debentures, and notes must be rated A or better by Moody’s
investors service or Standard and Poor’s rating service.
3. Fixed income securities must carry one of the two highest ratings by Moody’s
investors service and Standard and Poor’s rating service. If only one of the
above-mentioned services rates the security, it must carry the highest rating of
that service.
Custodial credit risk
Statutes require collateral for demand deposit, certificates of deposit, and repurchase
agreements at 101 percent of all deposits not covered by federal depository insurance.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
51
Notes to Financial Statements
Concentration of credit risk
Statutes do not include any requirements for concentration of credit risk.
Interest rate risk
Statutes require that public monies invested in securities and deposits have a
maximum maturity of 5 years and that public operating fund monies invested in
securities and deposits have a maximum maturity of 3 years. Investments in
repurchase agreements must have a maximum maturity of 180 days.
Foreign currency risk
Statutes do not allow foreign investments.
Deposits—At June 30, 2010, the carrying amount of the County’s deposits was
$63,358,846, which primarily consisted of money market and savings accounts, and
the bank balance was $62,379,715. The County’s formal policy is to follow
collateralization requirements set forth in A.R.S. §35-323 as described above.
In November 2008, the FDIC’s Board of Directors established a program called the
Temporary Liquidity Guarantee Program (TLGP). This program was designed to assist
in the stabilization of the nation’s financial system. Under the Transaction Account
Guarantee (TAG) program, a component of the TLGP, the FDIC guarantees all funds
held in qualifying noninterest-bearing transaction accounts at participating insured
depository institutions. Effective June 22, 2010, an amendment to 12 CFR 370, in part,
extended the TAG program until December 31, 2010.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
52
Notes to Financial Statements
Investments—The County’s investments at June 30, 2010, were as follows:
Credit risk—The County’s formal policy is to limit its portfolio to investments with the
top rating issued by nationally recognized statistical rating organizations. As of June 30,
2010, credit risk for the County’s investments was as follows:
Custodial credit risk—For an investment, custodial credit risk is the risk that, in the
event of the counterparty’s failure, the County will not be able to recover the value of its
investments or collateral securities that are in the possession of an outside party. The
County’s formal policy stipulates that securities that are held in a custody or
safekeeping account must be held under the name of Navajo County or Navajo County
Treasurer. At June 30, 2010, the County had $1,934,544 of U.S. Treasury money
market funds that were uninsured and held by the counterparty not in the County’s
name and $15,686,278 of repurchase agreements (secured by federal agency
securities) that were uninsured and held by the counterparty’s trust department or agent
not in the County’s name.
Investment Type Amount
U.S. agency securities $60,481,830
Repurchase agreements 15,686,278
Corporate bonds 5,000,000
Bank notes 3,000,000
U.S. Treasury money market funds 1,934,544
$86,102,652
Investment Type Rating Rating Agency Amount
U.S. agency securities AAA Standard and Poor’s $36,785,760
U.S. agency securities AAAe Standard and Poor’s 23,696,070
Repurchase agreements Aaa Moody’s 15,686,278
Corporate bonds AAA Standard and Poor’s 5,000,000
Bank notes AAA Standard and Poor’s 3,000,000
U.S. Treasury money market funds AAAm Standard and Poor’s 1,934,544
$86,102,652
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
53
Notes to Financial Statements
Concentration of credit risk—The County’s formal policy stipulates that the County
will diversify the investment portfolio by limiting investments to avoid over-concentration
in securities from a specific issuer, excluding obligations issued or
guaranteed by the United States or any of the senior debt of its agencies or
sponsored agencies. The County had investments at June 30, 2010, of 5 percent or
more in Federal Home Loan Bank, Federal National Mortgage Association (including
repurchase agreements), Federal Home Loan Mortgage Corporation, and General
Electric Capital Corporation bond. These investments were 37.57 percent, 34.99
percent, 15.91 percent and 5.81 percent, respectively, of the County’s total
investments.
Interest rate risk—The County’s formal policy is to purchase a combination of short-,
medium-, and long-term investments such that maturities occur evenly over time as
necessary to provide the cash flow needed for operations. At June 30, 2010, the
County had the following investments in debt securities:
Investment Type Amount Weighted Average
Maturity (In Years)
U.S. agency securities $60,481,830 1.953
Repurchase agreements 15,686,278 .003
Corporate bonds 5,000,000 .523
Bank notes 3,000,000 1.923
U.S. Treasury money market funds 1,934,544 .003
$86,102,652
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
54
Notes to Financial Statements
At June 30, 2010, $23,758,931 of the investments in U.S agency securities and
$3,000,000 of investments in bank notes were considered to be highly sensitive to inter-est
rate changes:
U.S. agency step-up securities – On specified dates, the issuer can
call the security. If the security is not called, the interest rate is
increased by a specified amount. Prevailing interest rates may
increase faster than the increase in the coupon interest rate. $ 23,758,931
Bank note floating rate security – The coupon rate is tied to the
London Interbank Offered Rate plus a fixed basis point amount
which resets quarterly. The issuer can call the security on a
specified date, or if the security is not called, the interest rate is reset
at a specified amount. Prevailing interest rates may increase faster
than the increase in the coupon interest rate.
3,000,000
Total $ 26,758,931
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
55
Notes to Financial Statements
A reconciliation of cash, deposits, and investments to amounts shown on the
Statements of Net Assets follows:
Cash, deposits, and investments:
Note 4 - Due from Other Governments
Amounts due from other governments at June 30, 2010, include $957,586 in state and
county sales taxes, $410,931 in vehicle license taxes from the State of Arizona,
$703,804 in state-shared revenue from highway user taxes, and $2,129,766 in various
grants from the state and federal governments.
Cash on hand $ 53,020
Amount of deposits 63,358,846
Amount of investments 86,102,652
Total $ 149,514,518
Governmental
Activities
Investment
Trust
Funds
Agency
Funds
Total
Cash and investments
$37,853,647
$105,297,219
$4,434,108
$147,584,974
Cash and investments held
by trustee
1,276,107
1,276,107
Restricted assets—cash
and investments held by
trustee 653,437
653,437
Total
$39,783,191
$105,297,219
$4,434,108
$149,514,518
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
56
Note 5 - Capital Assets
Capital asset activity for the year ended June 30, 2010, was as follows:
Balance
July 1, 2009
Increases
Decreases
Balance
June 30, 2010
Governmental activities:
Capital assets not being depreciated:
Land $ 5,439,671 $ 30,000 $ - $ 5,469,671
Construction in progress 6,524,469 2,721,938 2,611,321 6,635,086
Total capital assets not being
depreciated
11,964,140
2,751,938
2,611,321
12,104,757
Capital assets being depreciated:
Buildings and improvements 32,353,226 11,456 - 32,364,682
Infrastructure 73,042,113 1,065,396 930,675 73,176,834
Machinery and equipment 25,283,610 551,167 841,817 24,992,960
Total 130,678,949 1,628,019 1,772,492 130,534,476
Less accumulated depreciation for:
Buildings and improvements 12,842,016 971,815 - 13,813,831
Infrastructure 27,906,846 2,318,644 400,668 29,824,822
Machinery and equipment 19,055,693 2,131,088 841,817 20,344,964
Total 59,804,555 5,421,547 1,242,485 63,983,617
Total capital assets being
depreciated, net
70,874,394
(3,793,528)
530,007
66,550,859
Governmental activities capital
assets, net
$ 82,838,534
$(1,041,590)
$3,141,328
$ 78,655,616
Notes to Financial Statements
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
57
Notes to Financial Statements
Depreciation expense was charged to functions as follows:
Governmental activities:
General government $ 977,546
Public safety 1,129,236
Highways and streets 2,965,295
Health and welfare 101,123
Culture and recreation 6,474
Education 241,873
Total governmental activities depreciation expense $5,421,547
Note 6 - Construction and Other Significant Commitments
The County had major contractual commitments related to various capital projects at
June 30, 2010, for the construction of roads and bridges. At June 30, 2010, the County
had spent $6,635,086 on these projects and had remaining contractual commitments
with contractors of $4,763,487. These projects are being primarily financed from
revenue sources of the Public Works/HURF and Flood Control District Funds and
revenue bond monies.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
58
Notes to Financial Statements
Note 7 - Long-Term Liabilities
The following schedule details the County’s long-term liability and obligation activity
for the year ended June 30, 2010:
Revenue bonds—The County has issued revenue bonds that are generally callable
with interest payable semiannually. The bonds were issued to acquire a new regional
county service center in Show Low, to construct a new county administrative building
in Heber-Overgaard, and to make improvements to the water facility and electrical
system at the county complex.
Balance
July 1, 2009
Additions
Reductions
Balance
June 30, 2010
Due within
1 year
Governmental activities
Revenue bonds payable $6,600,000 $ - $ 335,000 $ 6,265,000 $ 350,000
Certificates of participation
payable 5,340,000 - 310,000 5,030,000 330,000
Special assessment debt with
governmental commitment
1,702,213
-
185,106
1,517,107
180,117
Capital leases payable 53,687 - 28,310 25,377 25,377
Landfill closure and post-closure
care costs payable
11,591
-
724
10,867
724
Compensated absences
payable 2,399,835 2,029,677 1,938,672 2,490,840 1,950,252
Total governmental
activities long-term
liabilities $16,107,326
$2,029,677 $2,797,812 $15,339,191 $2,836,470
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
59
Notes to Financial Statements
Revenue bonds outstanding at June 30, 2010, were as follows:
The following schedule details debt service requirements to maturity for the
County’s revenue bonds payable at June 30, 2010:
The County has pledged a portion of its general county sales tax revenues toward
the payment of debt related to revenue bonds outstanding at June 30, 2010. At June
30, 2010, pledged revenues totaled $8,103,694, consisting of $6,265,000 for
principal and $1,838,694 for interest. The amount of $575,573, or 7.10 percent of
total pledged revenues, was required to cover current-year debt service. Future
principal and interest payments are expected to require less than 4% of pledged
sales tax revenues. Future pledged revenues required to pay all remaining debt
service for revenue bonds through final maturity at July 1, 2024, is $8,103,694.
Governmental Activities
Principal Interest
Year ending June 30
2011 $ 350,000 $ 228,585
2012 370,000 215,985
2013 380,000 202,860
2014 385,000 189,473
2015 405,000 175,648
2016-20 2,255,000 648,615
2021-24 2,120,000 177,528
Total $6,265,000 $1,838,694
Description
Original
Amount
Maturity
Ranges
Interest
Rates
Outstanding
Principal
Navajo County Pledged
Revenue Obligations,
Series 2008
$6,600,000
2011 – 2024
3.50 – 4.00%
$6,265,000
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
60
Notes to Financial Statements
Certificates of participation—The County has issued certificates of participation
(COPs) that are generally noncallable with interest payable semiannually to finance the
construction of jail facilities. The original amount of certificates issued in prior years was
$7,320,000.
Certificates outstanding at June 30, 2010, were as follows:
The following schedule details debt service requirements to maturity for the County’s
certificates of participation payable at June 30, 2010:
Description
Original
Amount
Maturity
Ranges
Interest
Rates
Outstanding
Principal
Navajo County, Arizona Municipal
Property Corporation Jail
Facility COPs, Series 2000
$7,320,000
2010 – 2021
5.00 – 6.25%
$5,030,000
Governmental Activities
Principal Interest
Year ending June 30
2011 $ 330,000 $ 298,031
2012 355,000 278,100
2013 375,000 256,200
2014 400,000 232,950
2015 425,000 208,200
2016-20 2,530,000 606,319
2021 615,000 19,219
Total $5,030,000 $1,899,019
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
61
Notes to Financial Statements
Special assessment debt with governmental commitment—Special assessment
bonds are payable from assessments collected from property owners benefited by
the respective improvements. The special assessment districts pledged these
assessments to repay the principal amount of $ 2,103,874 in special assessment
bonds. The proceeds were used to finance the construction or improvement of
roads, water and wastewater systems, and community facilities. Total principal and
interest remaining to be paid on these bonds is $1,893,804, payable through July
2019. At June 30, 2010, pledged revenues totaled $1,893,804, consisting of
$1,517,107 for principal and $376,697 for interest. The amount of $255,735, or 13.5
percent of total pledged revenues, was required to cover current-year debt service.
Future principal and interest payments are expected to require 100 percent of
pledged special assessment revenues. Future pledged revenues required to pay all
remaining debt service for special assessment debt through final maturity at July 1,
2019, is $1,893,804. While there is no legal obligation for the County to further
secure the special assessment bonds of the districts below, the County has made a
moral commitment to take steps necessary to prevent default.
Special assessment bonds currently outstanding for governmental activities are as
follows:
Description
Amount of
Issue
Interest
Rates
Maturity
Ranges
Outstanding at
June 30, 2010
Sutter Drive $ 245,750 5.50% 2011-2016 $ 122,944
Scott's Pine Tract A 184,124 6.17% 2011-2017 88,638
Shumway Road 1,150,000 5.40% 2011-2017 825,000
Bucking Horse 524,000 5.75% 2011-2019 480,525
Total $2,103,874 $1,517,107
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
62
Notes to Financial Statements
Annual debt service requirements to maturity for the special assessment debt with
governmental commitment are as follows:
Compensated absences—Compensated absences are paid from various funds in
the same proportion that those funds pay payroll costs. During fiscal year 2010, the
County paid for compensated absences as follows: 65 percent from the General
Fund, 12 percent from the Public Works/HURF Fund, 1 percent from the Flood
Control District Fund, and 22 percent from the Other Governmental Funds.
Governmental Activities
Principal Interest
Year ending June 30
2011 $ 180,117 $ 83,934
2012 178,154 73,890
2013 186,154 63,994
2014 198,154 53,656
2015 216,154 42,663
2016-20 558,374 58,560
Total $1,517,107 $376,697
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
63
Notes to Financial Statements
Note 8 - Risk Management
Public entity risk pools—The County is exposed to various risks of loss related to
torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to
employees; and natural disasters; but was unable to obtain insurance at a cost it
considered to be economically justifiable. Therefore, the County joined and is covered
by two public entity risk pools: the Arizona Counties Property and Casualty Pool and the
Arizona Counties Workers’ Compensation Pool, which are described below.
The Arizona Counties Property and Casualty Pool is a public entity risk pool currently
composed of 11 member counties. The pool provides member counties catastrophic
loss coverage for risks of loss related to torts; theft of, damage to, and destruction of
assets; errors and omissions; and natural disasters; and provides risk management
services. Such coverage includes all defense costs as well as the amount of any
judgment or settlement. The County is responsible for paying a premium based on its
exposure in relation to the exposure of the other participants and a deductible of
$10,000 per occurrence for property claims and $50,000 per occurrence for liability
claims. The County is also responsible for any payments in excess of the maximum
coverage of $300 million per occurrence for property claims and $15 million per
occurrence for liability claims. However, lower limits apply to certain categories of
losses. A county must participate in the pool at least 3 years after becoming a member;
however, it may withdraw after the initial 3-year period. If the pool were to become
insolvent, the County would be assessed an additional contribution.
The Arizona Counties Workers’ Compensation Pool is a public entity risk pool currently
composed of 11 member counties. The pool provides member counties with workers’
compensation coverage, as required by law, and risk management services. The
County is responsible for paying a premium, based on an experience-rating formula,
that allocates pool expenditures and liabilities among the members.
The Arizona Counties Property and Casualty Pool and the Arizona Counties Workers’
Compensation Pool receive independent audits annually and an audit by the Arizona
Department of Insurance every 5 years. Both pools accrue liabilities for losses that have
been incurred but not reported. These liabilities are determined annually based on an
independent actuarial valuation.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
64
Notes to Financial Statements
June 30, 2010
On July 1, 2009, the County terminated the Navajo County Employee Benefit Trust
(NCEBT), which had been created to provide and administer a self-insured program for
employee health benefits. On that date, the County transferred the assets and liabilities
of the NCEBT, which was accounted for as an internal service fund, to the General Fund
as provided by A.R.S. §11-981. The County paid the NCEBT’s liabilities for reported but
unpaid claims and for claims incurred but not reported prior to July 1, 2009, from the
General Fund. These claims were paid as of June 30, 2010. Also on July 1, 2009,
Navajo County joined the Public Employers Health Pool (APEHP), formerly Verde Valley
Employee Benefit Pool, pursuant to A.R.S §11-952.01. APEHP is a consortium of
participating local governments that provides medical and dental insurance coverage to
its participants’ employees. In addition, APEHP is self-funded through an agreement
with participating members and APEHP administers the plan. The members’ employee
and employer contributions are paid to the pool to pay benefits and administrative
expenses. If the County withdraws from APEHP, it is responsible for its proportionate
share of any claims’ run out costs, including claims reported but not settled, claims
incurred but not reported, and administrative costs. If the APEHP were to terminate, the
County would be responsible for its proportionate share of any pool deficit.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
65
Notes to Financial Statements
Note 9 - Operating Leases
The County leases office space and land under the provisions of various long-term
lease agreements classified as operating leases for accounting purposes. Rental
expenditures under the terms of the operating leases were $94,088 for the year ended
June 30, 2010. The operating leases have remaining noncancelable terms from 1 to 15
years and provide renewal options. The future minimum payments required under the
operating leases at June 30, 2010, were as follows:
Governmental
Activities
Year ending June 30
2011
$ 71,426
2012
39,137
2013
31,486
2014
31,486
2015
31,486
2016 – 2020
123,000
2021 – 2025
123,000
Total minimum lease payments $451,021
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
66
Notes to Financial Statements
Note 10 - Pensions and Other Postemployment Benefits
Plan Descriptions—The County contributes to the four plans described below.
Benefits are established by state statute and the plans generally provide retirement,
long-term disability, and health insurance premium benefits, including death and
survivor benefits. The retirement benefits are generally paid at a percentage, based on
years of service, of the retirees’ average compensation. Long-term disability benefits
vary by circumstance, but generally pay a percentage of the employee’s monthly
compensation. Health insurance premium benefits are generally paid as a fixed dollar
amount per month towards the retiree’s healthcare insurance premiums, in amounts
based on whether the benefit is for the retiree or for the retiree and his or her
dependents.
The Arizona State Retirement System (ASRS) administers a cost-sharing, multiple-employer
defined benefit pension plan; a cost-sharing, multiple-employer defined
benefit health insurance premium plan; and a cost-sharing, multiple-employer defined
benefit long-term disability plan that covers employees of the State of Arizona and
employees of participating political subdivisions and school districts. The ASRS is
governed by the Arizona State Retirement System Board according to the provisions of
A.R.S. Title 38, Chapter 5, Article 2.
The Public Safety Personnel Retirement System (PSPRS) administers an agent
multiple-employer defined benefit pension plan and an agent multiple-employer defined
benefit health insurance premium plan that covers public safety personnel who are
regularly assigned hazardous duty as employees of the State of Arizona and
participating political subdivisions. The PSPRS, acting as a common investment and
administrative agent, is governed by a five-member board, known as The Fund
Manager, and participating local boards according to the provisions of A.R.S. Title 38,
Chapter 5, Article 4.
The Corrections Officer Retirement Plan (CORP) administers an agent multiple-employer
defined benefit pension plan and an agent multiple-employer defined benefit
health insurance premium plan that covers state, county, and local correction officers;
dispatchers; and probation, surveillance, and juvenile detention officers. The CORP is
governed by The Fund Manager of PSPRS and participating local boards according to
the provisions of A.R.S. Title 38, Chapter 5, Article 6.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
67
Notes to Financial Statements
The Elected Officials Retirement Plan (EORP) administers a cost-sharing, multiple-employer
defined benefit pension plan and a cost-sharing, multiple-employer defined
benefit health insurance premium plan that covers State of Arizona and county elected
officials and judges, and elected officials of participating cities. The EORP is governed
by The Fund Manager of PSPRS according to the provisions of A.R.S. Title 38,
Chapter 5, Article 3. Because the health insurance premium plan benefit of the EORP
is not established as a formal trust, the EORP is reported in accordance with GASB
Statement No. 45 as an agent multiple-employer defined benefit plan. Accordingly, the
disclosures that follow reflect the EORP as if it were an agent multiple-employer
defined benefit plan.
Each plan issues a publicly available financial report that includes its financial
statements and required supplementary information. A report may be obtained by
writing or calling the applicable plan.
Funding Policy—The Arizona State Legislature establishes and may amend active
plan members’ and the County’s contribution rates for the ASRS, PSPRS, CORP, and
EORP.
Cost-sharing plans—For the year ended June 30, 2010, active ASRS members were
required by statute to contribute at the actuarially determined rate of 9.4 percent (9.0
percent for retirement and 0.4 percent long-term disability) of the members’ annual
covered payroll and the County was required by statute to contribute at the actuarially
determined rate of 9.4 percent (8.34 percent for retirement, 0.66 percent for health
insurance premium, and 0.4 percent for long-term disability) of the members’ annual
covered payroll.
ASRS PSPRS, CORP, and EORP
3300 North Central Avenue 3010 East Camelback Road, Suite 200
P.O. Box 33910 Phoenix, AZ 85016-4416
Phoenix, AZ 85067-3910 (602) 255-5575
(602) 240-2000 or 1-800-621-3778
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
68
Notes to Financial Statements
The County’s contributions for the current and 2 preceding years, all of which were
equal to the required contributions, were as follows:
Agent plans—For the year ended June 30, 2010, active PSPRS members were
required by statute to contribute 7.65 percent of the members’ annual covered payroll
and the County was required to contribute 21.11 percent, the aggregate of which is the
actuarially required amount. The health insurance premium portion of the contribution
rate was actuarially set at 0.81 percent of covered payroll. Active CORP members
were required by statute to contribute 8.41 percent of the members’ annual covered
payroll. In addition, the County was required to contribute 6.96 percent. The aggregate
of the members’ and the County’s contributions is the actuarially required amount. The
health insurance premium portion of the contribution rate was actuarially set at 0.53
percent of covered payroll. Active EORP members were required by statute to
contribute 7.00 percent of the members’ annual covered payroll; and the County was
required to remit a designated portion of certain court fees plus additional contributions
at the actuarially determined rate of 14.25 percent of the members’ annual covered
payroll. The health insurance premium portion of the contribution rate was actuarially
set at 1.89 percent of covered payroll.
Actuarial methods and assumptions—The contribution requirements for the year
ended June 30, 2010, were established by the June 30, 2008, actuarial valuations, and
those actuarial valuations were based on the following actuarial methods and
assumptions.
Health Benefit Long-Term
Retirement Fund Supplement Fund Disability Fund
Year ended June 30
2010 $1,506,523 $119,282 $72,330
2009 1,478,102 177,573 92,498
2008 1,402,691 182,620 87,106
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
69
Notes to Financial Statements
Actuarial valuations involve estimates of the value of reported amounts and
assumptions about the probability of events in the future. Amounts determined
regarding the funded status of the plans and the annual required contributions are
subject to continual revision as actual results are compared to past expectations and
new estimates are made. The required schedule of funding progress presented as
required supplementary information provides multiyear trend information that shows
whether the actuarial value of the plans’ assets are increasing or decreasing over time
relative to the actuarial accrued liability for benefits.
Projections of benefits are based on 1) the plans as understood by the County and
plans’ members and include the types of benefits in force at the valuation date, and 2)
the pattern of sharing benefit costs between the County and plans’ members to that
point. Actuarial calculations reflect a long-term perspective and employ methods and
assumptions that are designed to reduce short-term volatility in actuarial accrued
liabilities and the actuarial value of assets. The significant actuarial methods and
assumptions used are the same for all plans and related benefits (unless noted), and
the actuarial methods and assumptions used to establish the fiscal year 2010
contribution requirements, are as follows:
Actuarial valuation date June 30, 2008
Actuarial cost method Projected unit credit
Amortization method Level percent closed for unfunded actuarial accrued
liability, open for excess
Remaining amortization period 28 years for unfunded actuarial accrued liability, 20
years for excess
Asset valuation method Smoothed market value
Actuarial assumptions:
Investment rate of return 8.50%
Projected salary increases 5.50%-8.50% for PSPRS and CORP; 5.00% for
EORP
includes inflation at 5.50% for PSPRS and CORP; 5.00% for EORP
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
70
Notes to Financial Statements
Annual Pension/OPEB Cost—The County’s pension/OPEB cost for the agent plans
for the year ended June 30, 2010, and related information follows:
PSPRS CORP EORP
Health Health Health
Pension Insurance Pension Insurance Pension Insurance
Annual pension/
OPEB costs $413,594 $16,032 $122,623 $10,107 $193,294 $29,557
Contributions made 413,594 16,032 122,623 10,107 193,294 29,557
Trend Information—Annual pension and OPEB cost information for the current and 2
preceding years follows for each of the agent plans.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
71
Notes to Financial Statements
Plan
Year Ended
June 30
Annual Pension/
OPEB Cost
Percentage of
Annual Cost
Contributed
Net Pension/OPEB
Obligation
PSPRS
Pension 2010 $413,594 100% $0
Health insurance 2010 16,032 100% 0
Pension 2009 475,483 100% 0
Health insurance 2009 18,618 100% 0
Pension 2008 334,908 100% 0
Health insurance 2008 11,838 100% 0
CORP
Pension 2010 122,623 100% 0
Health insurance 2010 10,107 100% 0
Pension 2009 108,232 100% 0
Health insurance 2009 9,207 100% 0
Pension 2008 68,860 100% 0
Health insurance 2008 8,514 100% 0
EORP
Pension 2010 193,294 100% 0
Health insurance 2010 29,557 100% 0
Pension 2009 252,214 100% 0
Health insurance 2009 14,585 100% 0
Pension 2008 178,061 100% 0
Health insurance 2008 15,858 100% 0
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
72
Notes to Financial Statements
Funded Status—The funded status of the plans as of the most recent valuation date,
June 30, 2010, along with the actuarial assumptions and methods used in those
valuations follow. The EORP, by statute, is a cost-sharing plan. However, because of its
statutory construction, in accordance with GASB Statement No. 43, paragraphs 5 and
41, the EORP is reported for such purposes as an agent multiple-employer plan. The
Fund Manager obtains an actuarial valuation for the EORP on its statutory basis as a
cost-sharing plan and, therefore, actuarial information for the County, as a participating
government, is not available.
PSPRS CORP
Pension
Health
Insurance
Pension
Health
Insurance
Actuarial accrued liability (a) $11,424,640 $265,433 $2,580,501 $113,737
Actuarial value of assets (b) 6,141,516 - 2,789,103 -
Unfunded actuarial accrued liability
(funding excess) (a) – (b)
5,283,124
265,433
(208,602)
113,737
Funded ratio (b)/(a) 53.8% 0.0% 108.1% 0.0%
Covered payroll (c) $2,056,308 $2,056,308 $1,700,382 $1,700,382
Unfunded actuarial accrued liability (funding
excess) as a percentage of covered payroll ([(a)
- (b)]/(c))
256.9%
12.9%
(12.3%)
6.7%
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
73
Notes to Financial Statements
The actuarial methods and assumptions used are the same for all plans and related
benefits, and for the most recent valuation date, are as follows:
Actuarial valuation date June 30, 2010
Actuarial cost method Projected unit credit
Amortization method Level percent closed for unfunded actuarial
accrued liability, open for excess
Remaining amortization period 26 years for underfunded, 20 years for overfunded
Asset valuation method 7-year smoothed market value
Actuarial assumptions:
Investment rate of return 8.50%
Projected salary increases 5.5–8.5% for PSPRS and CORP; 5.00% for EORP
includes inflation at 5.50% for PSPRS and CORP; 5.00% for EORP
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
74
Notes to Financial Statements
Note 11 - Interfund Balances and Activity
Interfund receivables and payables—Interfund balances at June 30, 2010, were as
follows:
The interfund balances resulted from time lags between the dates that (1) interfund
goods and services are provided or reimbursable expenditures occur, (2) transactions
are recorded in the accounting system, and (3) payments between funds are made.
All interfund balances are expected to be paid in one year.
Payable to
Payable from
General
Fund
Public
Works/
HURF
Fund
Other
Governmental
Funds
Total
General Fund - - $ 6,001 $ 6,001
Flood Control District Fund - $274,479 - 274,479
Other Governmental Funds
$2,426,916 -
250,991
2,677,907
Total
$2,426,916 $274,479 $256,992 $2,958,387
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
75
Notes to Financial Statements
Interfund transfers—Interfund transfers for the year ended June 30, 2010, were as
follows:
In addition to the above interfund transfers, the general fund transferred $380,236 to the
agency funds to correctly report balances held in an agency capacity. Further, transfers
between the general fund and internal service fund were for the closeout of the internal
service fund during the year.
Transfers are used to (1) move revenues from the fund that statute or budget requires to
collect them to the fund that statute or budget requires to expend them, (2) move receipts
restricted to debt service from the funds collecting the receipts to the debt service fund as
debt service payments are due, and (3) use unrestricted revenues collected in the General
Fund to finance various programs accounted for in other funds in accordance with
budgetary authorizations.
Transfers to
Transfer from
General
Fund
Public
Works/HURF
Fund
Other
Governmental
Funds
Total
Internal
Service
Fund
General Fund - $ 5,000 $1,783,697 $ 550,000 $ 2,338,697
Public Works/HURF
Fund $ 787,506 - - - 787,506
Flood Control District
Fund 190,756 137,240 - - 327,996
Other Governmental
Funds 706,457 - 2,248,710 - 2,955,167
Internal Service Fund 2,189,115 - - - 2,189,115
Total $3,873,834 $142,240 $4,032,407 $550,000 $8,598,481
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
76
Notes to Financial Statements
Note 12 - County Treasurer’s Investment Pool
Arizona Revised Statutes require community colleges, school districts, and other local
governments to deposit certain public monies with the County Treasurer. The
Treasurer has a fiduciary responsibility to administer those and the County’s monies
under his stewardship. The Treasurer invests, on a pool basis, all idle monies not
specifically invested for a fund or program. In addition, the Treasurer determines the
fair value of those pooled investments annually at June 30.
The County Treasurer’s investment pool is not registered with the Securities and
Exchange Commission as an investment company, and there is no regulatory
oversight of its operations. The pool’s structure does not provide for shares, and the
County has not provided or obtained any legally binding guarantees to support the
value of the participants’ investments.
The Treasurer allocates interest earnings to each of the pool’s participants.
Substantially, all deposits and investments of the County’s primary government are
included in the County Treasurer’s investment pool, except for $1,636,416 in deposits
and $1,929,544 of investments in U.S. Treasury money market funds. Therefore, the
deposit and investment risks of the Treasurer’s investment pool are substantially the
same as the County’s deposit and investment risks. See Note 3 for disclosure of the
County’s deposit and investment risks.
Details of each major investment classification follow:
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
77
Notes to Financial Statements
Investment Type
Principal
Interest
Rates
Maturities
Amount
U.S. agency securities $60,481,830 1.125% - 3.75% 07/10 – 06/15 $60,481,830
Repurchase agreements 15,686,278 .10% 07/10 15,686,278
Corporate bonds 5,000,000 1.625% 01/11 5,000,000
Bank notes 3,000,000 Variable 06/12 3,000,000
U.S. Treasury money
market funds
5,000 .02% N/A 5,000
A condensed statement of the investment pool’s net assets and changes in net assets
follows:
Statement of Net Assets
Assets $146,134,869
Liabilities 4,454,984
Net assets $141,679,885
Net assets held in trust for:
Internal participants $ 36,214,996
External participants 105,464,889
Total net assets held in trust $141,679,885
Statement of Changes in Net Assets
Total additions $366,074,117
Total deductions 356,860,473
Net increase 9,213,644
Net assets held in trust:
July 1, 2009 132,466,241
June 30, 2010 $141,679,885
78
This Page Intentionally Left Blank Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
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OTHER Required
supplementary information
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
80
Required Supplementary Information
Budgetary Comparison Schedule
General Fund
Original and
Final Budgeted Actual Variance with
Amounts Amounts Final Budget
Revenues:
Property taxes $ 6,317,367 $ 6,397,385 $ 80,018
Licenses and permits 589,821 454,494 (135,327)
Fines and forfeits 921,800 1,087,357 165,557
Intergovernmental 21,056,585 20,545,394 (511,191)
Charges for services 802,701 1,012,452 209,751
Investment earnings 124,282 76,000 (48,282)
Miscellaneous 620,488 519,338 (101,150)
Total revenues 30,433,044 30,092,420 (340,624)
Expenditures:
General government
Board of Supervisors/Administration 2,808,074 2,275,796 532,278
Buildings and Grounds 1,950,946 1,710,928 240,018
Elections 632,162 294,120 338,042
Planning and Zoning 539,246 435,071 104,175
Recorder 274,487 211,093 63,394
Voter Registration 201,383 176,344 25,039
Assessor 1,279,006 1,178,060 100,946
Information Technology 1,120,048 730,462 389,586
Treasurer 448,466 421,748 26,718
Personnel Commission 17,515 9,693 7,822
County-wide 1,903,854 1,541,156 362,698
Legal Defender 393,517 378,195 15,322
County Attorney 2,272,528 2,193,109 79,419
Superior Court 2,773,135 2,713,390 59,745
Public Defender 1,090,356 804,601 285,755
Clerk of the Court 1,302,297 1,116,734 185,563
Holbrook Justice Court 334,869 329,513 5,356
Winslow Justice Court 307,666 308,868 (1,202)
Snowflake Justice Court 378,674 372,915 5,759
Show Low Justice Court 287,204 280,262 6,942
Pinetop Justice Court 340,811 330,501 10,310
Kayenta Justice Court 104,227 106,896 (2,669)
Kayenta Constable 26,629 25,525 1,104
See accompanying note to budgetary comparison schedule.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
81
Required Supplementary Information
Budgetary Comparison Schedule
General Fund
(Continued)
Original and
Final Budgeted Actual Variance with
Amounts Amounts Final Budget
Pinetop Constable $ 46,913 $ 51,186 $ (4,273)
Snowflake Constable 28,672 28,686 (14)
Holbrook Constable 26,671 26,447 224
Winslow Constable 28,976 31,529 (2,553)
Show Low Constable 47,425 47,244 181
Total general government 20,965,757 18,130,072 2,835,685
Public safety
Juvenile Detention 1,072,529 1,052,456 20,073
Juvenile Probation 455,308 410,905 44,403
Adult Probation 587,219 529,997 57,222
Jail Operations 6,832,252 5,370,488 1,461,764
Sheriff 6,093,401 4,862,526 1,230,875
Total public safety 15,040,709 12,226,372 2,814,337
Health and welfare
Public Fiduciary 447,795 389,820 57,975
Indigent Health 3,398,400 2,881,989 516,411
Total health and welfare 3,846,195 3,271,809 574,386
Education
School Superintendent 327,592 323,717 3,875
Capital outlay
Capital outlay 500,000 80,143 419,857
Construction projects 500,000 1,532 498,468
Total capital outlay 1,000,000 81,675 918,325
See accompanying note to budgetary comparison schedule.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
82
Required Supplementary Information
Budgetary Comparison Schedule
General Fund
(Continued)
Original and
Final Budgeted Actual Variance with
Amounts Amounts Final Budget
Contingency $ 4,000,000 $ - $ 4,000,000
Total expenditures 45,180,253 34,033,645 11,146,608
Excess (deficiency) of revenues
over expenditures (14,747,209) (3,941,225) 10,805,984
Other financing sources (uses):
Sale of capital assets - 95,036 95,036
Transfers in 5,491,534 3,873,834 (1,617,700)
Transfers out (2,595,249) (2,718,933) (123,684)
Total other financing sources and uses 2,896,285 1,249,937 (1,646,348)
Net change in fund balances (11,850,924) (2,691,288) 9,159,636
Fund balances, July 1, 2009 11,850,924 10,433,374 (1,417,550)
Fund balances, June 30, 2010 $ - $ 7,742,086 $ 7,742,086
See accompanying note to budgetary comparison schedule.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
83
Original and
Final Budgeted Actual Variance with
Amounts Amounts Final Budget
Revenues:
Intergovernmental $ 13,179,750 $ 15,032,384 $ 1,852,634
Charges for services - 39,249 39,249
Investment earnings 201,000 81,289 (119,711)
Miscellaneous 216,000 235,037 19,037
Total revenues 13,596,750 15,387,959 1,791,209
Expenditures:
Highways and streets 18,080,565 9,888,985 8,191,580
Total expenditures 18,080,565 9,888,985 8,191,580
Excess (deficiency) of revenues
over expenditures (4,483,815) 5,498,974 9,982,789
Other financing sources (uses):
Sale of capital assets - 20,201 20,201
Transfers in - 142,240 142,240
Transfers out (787,506) (787,506) -
Total other financing sources and uses (787,506) (625,065) 162,441
Net change in fund balances (5,271,321) 4,873,909 10,145,230
Fund balances, July 1, 2009 5,271,321 7,516,396 2,245,075
Increase in reserve for inventories - 41,280 41,280
Fund balances, June 30, 2010 $ - $ 12,431,585 $ 12,431,585
See accompanying note to budgetary comparison schedule.
Required Supplementary Information
Budgetary Comparison Schedule
Public Works/HURF Fund
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
84
Required Supplementary Information
Budgetary Comparison Schedule
Flood Control District Fund
Original and
Final Budgeted Actual Variance with
Amounts Amounts Final Budget
Revenues:
Property taxes $ 2,695,827 $ 2,742,386 $ 46,559
Investment earnings 154,753 66,694 (88,059)
Total revenues 2,850,580 2,809,080 (41,500)
Expenditures:
Public safety 7,426,697 817,477 6,609,220
Total expenditures 7,426,697 817,477 6,609,220
Excess (deficiency) of revenues
over expenditures (4,576,117) 1,991,603 6,567,720
Other financing sources (uses):
Transfers out (190,756) (327,996) (137,240)
Total other financing sources and uses (190,756) (327,996) (137,240)
Net change in fund balances (4,766,873) 1,663,607 6,430,480
Fund balances, July 1, 2009 4,766,873 6,937,255 2,170,382
Fund balances, June 30, 2010 $ - $ 8,600,862 $ 8,600,862
See accompanying note to budgetary comparison schedule.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
85
Note 1 - Budgeting and Budgetary Control
A.R.S. requires the County to prepare and adopt a balanced budget annually for each
governmental fund. The Board of Supervisors must approve such operating budgets on
or before the third Monday in July to allow sufficient time for the legal announcements
and hearings required for the adoption of the property tax levy on the third Monday in
August. A.R.S. prohibits expenditures or liabilities in excess of the amounts budgeted.
Expenditures may not legally exceed appropriations at the department level. In certain
instances, transfers of appropriations between departments or from the contingency
account to a department may be made upon the Board of Supervisors’ approval. With
the exception of the General Fund, each fund includes only one department.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
86
Required Supplementary Information
Schedule of Agent Retirement Plans’ Funding Progress
Public Safety Personnel Retirement System
Actuarial
Valuation Date
Actuarial
Value of
Plan
Assets
(a)
Actuarial
Accrued
Liability
(b)
Funding
(Liability)
Excess
(a-b)
Funded
Ratio
(a/b)
Annual
Covered
Payroll
(c)
Unfunded
Liability as
Percentage
of Covered
Payroll
([a-b]/c)
Pension
6/30/10 $6,141,516 $11,424,640 $(5,283,124) 53.8 $2,056,308 256.9%
Health Insurance
6/30/10 - 265,433 (265,433) 0.0 2,056,308 12.9
Pension
6/30/09 6,326,218 10,930,809 (4,604,591) 57.9 2,098,902 219.4
Health Insurance
6/30/09 - 272,996 (272,996) 0.0 2,098,902 13.0
Pension
6/30/08 5,911,599 9,957,770 (4,046,171) 59.4 2,033,947 198.9
Health Insurance
6/30/08 - 372,652 (372,652) 0.0 2,033,947 18.3
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
87
Required Supplementary Information
Schedule of Agent Retirement Plans’ Funding Progress
Corrections Officer Retirement Plan
Actuarial
Valuation Date
Actuarial
Value of
Plan
Assets
(a)
Actuarial
Accrued
Liability
(b)
Funding
(Liability)
Excess
(a-b)
Funded
Ratio
(a/b)
Annual
Covered
Payroll
(c)
Unfunded
Liability as
Percentage
of Covered
Payroll
Pension
6/30/10 $2,789,103 $2,580,501 $208,602 108.1% $1,700,382 N/A
Health Insurance
6/30/10 - 113,737 (113,737) 0.0 1,700,382 6.7%
Pension
6/30/09 2,583,339 2,363,977 219,362 109.3 $1,955,474 N/A
Health Insurance
6/30/09 - 115,931 (115,931) 0.0 1,955,474 5.9
Pension
6/30/08 2,100,462 1,948,603 151,859 107.8 1,743,730 N/A
Health Insurance
6/30/08 - 80,646 (80,646) 0.0 1,743,730 4.6
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
88
Required Supplementary Information
Schedule of Agent Retirement Plans’ Funding Progress
Note 1 - Actuarial Information Available
The EORP, by statute, is a cost-sharing plan. However, because of its statutory
construction, in accordance with GASB Statement No. 43, paragraphs 5 and 41, the
EORP is reported for such purposes as an agent multiple-employer plan. The Fund
Manager obtains an actuarial valuation for the EORP on its statutory basis as a cost-sharing
plan and, therefore, actuarial information for the County, as a participating
government, is not available.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
89
Nonmajor Governmental Funds
Special Revenue Funds
Administration Accounts for administration of a variety of programs including the
Assessor, Recorder and Treasurer surcharges, election services and
certain emergency service functions. Funding sources include service
related surcharges, federal and state grant funds, fees and local
government contributions.
County Attorney Accounts for various programs administered by the County Attorney
including Victim's Rights, Assistance and Restitution, Child Support
Enforcement, Anti-Racketeering, High-Intensity Drug Trafficking Area
and Bad Check. Funding sources include statutory fees and other
surcharges related to criminal prosecution, federal and state grants
and other user fees.
Courts Accounts for the processing of criminal cases as well as court
enhancement and record retention improvement funds. Funding
sources include statutory fees and other surcharges related to the
courts.
Environmental and Conservation Accounts for forest health programs. Funding is provided by federal
grants.
Housing Accounts for housing and community development programs.
Funding is provided by federal Community Development Block
Grants.
Library District Accounts for support services and materials provided to the County's
community libraries. Funding sources include federal and state grants
and a secondary property tax levy.
Probation Accounts for Adult and Juvenile Probation programs and services
provided in coordination with the State's Superior Court System.
Funding sources include state grants and fees paid by probationers.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
90
Nonmajor Governmental Funds
Special Revenue Funds
Public Defense Accounts for the public defense of criminal cases including public
defense enhancement funds. Funding sources include statutory fees
and other surcharges related to public defense.
Public Health Accounts for a variety of health service and education programs
including Bio-Terrorism, Women, Infants and Children (WIC), Nutrition,
Tobacco, Dental and contagious diseases. Funding sources include a
secondary property tax levy, federal and state grants, appropriations,
fees and private party contributions.
Recreation Accounts for operating costs of the White Mountain Lake Recreation
District. Funding sources are fees and secondary property taxes
assessed the benefiting property owners within the district boundaries.
Sheriff's Office Accounts for various jail and law enforcement programs including Jail
Enhancement, Drug Enforcement, Anti-Racketeering, High-Intensity
Drug Trafficking Area and Boating Safety. Funding sources include
federal and state grants.
Special Districts Accounts for operating costs for the Silver Creek, Bucking Horse,
Victory Heights, Hilltop Drive, Mountain View and North Whistle Stop
Loop County Road Improvement Districts. Funding sources are
secondary property taxes assessed the benefiting property owners
within the district boundaries.
Superintendent of Schools Accounts for educational services and programs including the
Rainbow Accommodation School, juvenile detention Hope School,
Special Services Consortium and unincorporated school district
territory. Funding sources include federal and state grants and
charges for services from local school districts.
Workforce Investment Act (WIA) Accounts for administration of the federal Workforce Investment Act
(WIA) program. Funding is from federal grants.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
91
Nonmajor Governmental Funds
Capital Projects Funds
General Government Accounts for construction of County buildings and improvements to
existing facilities.
Public Health Accounts for construction of the South County Public Health building.
Special Districts Accounts for construction costs of the Shumway Road and Roan
Circle County Road Improvement Districts. Funding sources are from
developer contributions and secondary property taxes assessed the
benefiting property owners within the district boundaries.
Debt Service Funds
General Government Account for the accumulation of resources for payment of principal and
interest on the 2000 Series Certificates of Participation jail construction
bonds and the 2008 Series Revenue Bonds for acquisition of property
and buildings at the Heber and Show Low complexes and for water
and electrical upgrades at the Holbrook complex. Funding for debt
service payments is annual appropriations
Jail Accounts for the accumulation of resources for the payment of
principal and interest on bonds and other debt instruments of the 2000
Series Certificates of Participation jail construction bonds. Funding for
debt service payments is annual appropriations
Special Districts Accounts for the accumulation of resources for the payment of
principal and interest on bonds and other debt instruments of the
Sutter Drive, Madison Lane, Scott's Pine Meadow, Shumway Road,
Bucking Horse, Wild Cat Way, Beaver Dam and North Whistle Stop
Loop County Road Improvement Districts. Funding sources are
secondary property taxes assessed the benefiting property owners
within the district boundaries.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
92
County Environmental
Administration Attorney Courts and Conservation
Assets
Cash and investments $ 1,819,183 $ 1,470,570 $ 1,347,167 $ 175,581
Cash and investments held by trustee - - - -
Receivables:
Property taxes - - - -
Accrued interest 2,122 1,691 1,637 207
Other - - - -
Due from other funds 12,060 4,147 190,672 -
Due from other governments 30,950 149,610 - 15,000
Prepaid items - - - -
Restricted assets:
Cash and investments held by trustee - - - -
Total assets $ 1,864,315 $ 1,626,018 $ 1,539,476 $ 190,788
Liabilities and fund balance
Liabilities:
Accounts payable $ 107,658 $ 38,216 $ 36,906 $ 18,708
Accrued payroll & employee benefits 3,535 43,092 23,232 -
Due to other funds 273,152 382,699 290,046 26,554
Deferred revenues - - - -
Total liabilities 384,345 464,007 350,184 45,262
Fund balances:
Unreserved, reported in
Special revenue funds 1,479,970 1,162,011 1,189,292 145,526
Capital projects funds - - - -
Debt service funds - - - -
Total fund balances(deficits) 1,479,970 1,162,011 1,189,292 145,526
Total liabilities and fund balances $ 1,864,315 $ 1,626,018 $ 1,539,476 $ 190,788
Combining Balance Sheet
Nonmajor Governmental Funds
Special Revenue
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
93
Special Revenue
Library Public Public
Housing District Probation Defense Health
Assets
Cash and investments $ 2,855 $ 371,828 $ 675,376 $ 475,895 $ 830,553
Cash and investments held by trustee - - - - -
Receivables:
Property taxes - 33,448 - - 131,619
Accrued interest 3 442 829 553 3,269
Other - - - - -
Due from other funds - 4,132 37,226 - 1,533
Due from other governments 244,955 18,070 - - 183,568
Prepaid items - - - - -
Restricted assets: -
Cash and investments held by trustee - - - - -
Total assets $ 247,813 $ 427,920 $ 713,431 $ 476,448 $ 1,150,542
Liabilities and fund balance
Liabilities:
Accounts payable $ - $ 26,176 72,099 $ 13,537 $ 52,694
Accrued payroll & employee benefits - 7,811 68,067 930 79,569
Due to other funds 319,860 66,531 41,523 6,594 270,466
Deferred revenues - 24,545 - - 96,710
Total liabilities 319,860 125,063 181,689 21,061 499,439
Fund balances:
Unreserved, reported in
Special revenue funds (72,047) 302,857 531,742 455,387 651,103
Capital projects funds - - - - -
Debt service funds - - - - -
Total fund balances(deficits) (72,047) 302,857 531,742 455,387 651,103
Total liabilities and fund balances $ 247,813 $ 427,920 $ 713,431 $ 476,448 $ 1,150,542
Combining Balance Sheet
Nonmajor Governmental Funds
(Continued)
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
94
Special Revenue
Sheriff's Special Superintendent
Recreation Office Districts of Schools
Assets
Cash and investments $ 85,083 $ 864,319 $ 732,245 $ 2,922,206
Cash and investments held by trustee - - - -
Receivables:
Property taxes 37,691 - 6,061 -
Accrued interest 107 2,533 852 3,391
Other - - - -
Due from other funds - 2,260 - -
Due from other governments - 31,607 - 735,242
Prepaid items - - - 45,569
Restricted assets:
Cash and investments held by trustee - - - -
Total assets $ 122,881 $ 900,719 $ 739,158 $ 3,706,408
Liabilities and fund balance
Liabilities:
Accounts payable $ 12,181 $ 100,168 $ 1,201 $ 28,328
Accrued payroll & employee benefits - 3,289 - -
Due to other funds - 196,869 127,627 -
Deferred revenues 31,677 - 5,359 -
Total liabilities 43,858 300,326 134,187 28,328
Fund balances:
Unreserved, reported in
Special revenue funds 79,023 600,393 604,971 3,678,080
Capital projects funds - - - -
Debt service funds - - - -
Total fund balances(deficits) 79,023 600,393 604,971 3,678,080
Total liabilities and fund balances $ 122,881 $ 900,719 $ 739,158 $ 3,706,408
Combining Balance Sheet
Nonmajor Governmental Funds
(Continued)
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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Special Revenue
Workforce General Public Special
Investment Act Government Health Districts
Assets
Cash and investments $ 191,035 $ - $ - $ 215,872
Cash and investments held by trustee - - - -
Receivables:
Property taxes - - - -
Accrued interest 222 - - 251
Other - - - -
Due from other funds 4,962 - - -
Due from other governments - - - -
Prepaid items - - - -
Restricted assets:
Cash and investments held by trustee - - - -
Total assets $ 196,219 $ - $ - $ 216,123
Liabilities and fund balance
Liabilities:
Accounts payable $ 10,625 $ - $ - $ -
Accrued payroll & employee benefits 7,111 - - -
Due to other funds 372,247 122,528 - 17,263
Deferred revenues - - - -
Total liabilities 389,983 122,528 - 17,263
Fund balances:
Unreserved, reported in
Special revenue funds (193,764) - - -
Capital projects funds - (122,528) - 198,860
Debt service funds - - - -
Total fund balances(deficits) (193,764) (122,528) - 198,860
Total liabilities and fund balances $ 196,219 $ - $ - $ 216,123
Capital Projects
Combining Balance Sheet
Nonmajor Governmental Funds
(Continued)
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Comprehensive annual financial report
Year Ended June 30, 2010
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Total
Nonmajor
General Special Governmental
Government Jail Districts Funds
Assets
Cash and investments $ - $ 427,561 $ 56,178 12,663,507
Cash and investments held by trustee 467,355 483,656 - 951,011
Receivables:
Property taxes - - 26,762 235,581
Accrued interest - 497 65 18,671
Other - - - 256,992
Due from other funds - - - 1,409,002
Due from other governments - - - 45,569
Prepaid items - - - -
Restricted assets:
Cash and investments held by trustee - 653,437 - 653,437
Total assets $ 467,355 $ 1,565,151 $ 83,005 $ 16,233,770
Liabilities and fund balance
Liabilities:
Accounts payable $ - $ - $ - 518,497
Accrued payroll & employee benefits - - - 236,636
Due to other funds - - 163,948 2,677,907
Deferred revenues - - 26,701 184,992
Total liabilities - - 190,649 3,618,032
Fund balances:
Unreserved, reported in
Special revenue funds - - - 10,614,544
Capital projects funds - - - 76,332
Debt service funds 467,355 1,565,151 (107,644) 1,924,862
Total fund balances(deficits) 467,355 1,565,151 (107,644) 12,615,738
Total liabilities and fund balances $ 467,355 $ 1,565,151 $ 83,005 $ 16,233,770
Debt Service
Combining Balance Sheet
Nonmajor Governmental Funds
(Continued)
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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County Environmental
Administration Attorney Courts and Conservation
Revenues:
Property taxes $ - $ - $ - $ -
Licenses and permits - - - -
Fines and forfeits - 191,875 - -
Intergovernmental 1,194,271 1,497,632 445,680 195,574
Charges for services 203,412 69,510 554,732 -
Investment earnings 8,868 3,604 10,276 1,064
Special assessments - - - -
Contributions - - - -
Miscellaneous 57,752 133,934 9,491 18,941
Total revenues 1,464,303 1,896,555 1,020,179 215,579
Expenditures:
General government 430,625 1,945,698 898,972 -
Public safety 53,634 - - -
Highways and streets - - - -
Health and welfare - - - -
Culture and recreation - - - -
Education 645,715 - - -
Environmental and conservation - - - 237,032
Urban redevelopment and housing - - - -
Debt Service
Principal - - - -
Interest and other charges - - - -
Total expenditures 1,129,974 1,945,698 898,972 237,0

Copyright to this resource is held by the creating agency and is provided here for educational purposes only. It may not be downloaded, reproduced or distributed in any format without written permission of the creating agency. Any attempt to circumvent the access controls placed on this file is a violation of United States and international copyright laws, and is subject to criminal prosecution.

Navajo
County
COMPREHENSIVE ANNUAL FINANCIAL REPORT
Fiscal Year
2009-10
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Introductory section
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NAVAJO COUNTY BOARD OF SUPERVISORSSUPERVISORS
Front Row: District 2—Jesse Thompson, District 4—David Tenney, District 1—Jonathan M. Nez
Back Row: District 3—J.R. DeSpain, District 5—Jerry Brownlow
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Introductory section
Navajo County Board of Supervisors 4
Letter of Transmittal 10
Organization Chart 16
FINANCIAL SECTION
Independent Auditor’s Report 20
Management’s Discussion and Analysis
(Required Supplementary Information) 22
BASIC FINANCIAL STATEMENTS:
Government-Wide Financial Statements:
Statement of Net Assets 32
Statement of Activities 33
Fund Financial Statements:
Balance Sheet - Governmental Funds 34
Reconciliation of the Balance Sheet to the
Statement of Net Assets 35
Statement of Revenues, Expenditures, and Changes
in Fund Balances - Governmental Funds 36
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances to the Statement
of Activities 37
Statement of Revenues, Expenses, and Changes in Fund
Net Assets - Proprietary Funds 38
Statement of Cash Flows - Proprietary Funds 39
Statement of Fiduciary Net Assets - Fiduciary Funds 40
Statement of Changes in Fiduciary Net Assets - Fiduciary Funds 41
Table of Contents
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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Notes to the Financial Statements:
Note 1– Summary of Significant Accounting Policies 42
Note 2– Stewardship, Compliance and Accountability 49
Note 3– Deposits and Investments 50
Note 4– Due From Other Governments 55
Note 5– Capital Assets 56
Note 6– Construction and Other Significant Commitments 57
Note 7– Long-Term Liabilities 58
Note 8– Risk Management 63
Note 9– Operating Leases 65
Note 10– Pensions and Other Postemployment Benefits 66
Note 11– Interfund Balances and Activity 74
Note 12– County Treasurer’s Investment Pool 76
Other Required Supplementary Information:
Budgetary Comparison Schedules
General Fund 80
Public Works/HURF Fund 83
Flood Control District Fund 84
Notes to Budgetary Comparison Schedules 85
Schedule of Agent Retirement Plans’ Funding Progress 86
Combining and Individual Fund Statements and Schedules:
Combining Balance Sheet – Nonmajor Governmental Funds 92
Combining Statement of Revenues, Expenditures, and Changes in
Fund Balances– Nonmajor Governmental Funds 97
Table of Contents
Navajo County
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Year Ended June 30, 2010
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8
Budgetary Comparison Schedules:
Nonmajor Governmental Funds 100
Special Revenue - Administration 102
Special Revenue - County Attorney 103
Special Revenue - Courts 104
Special Revenue - Environmental and Conservation 105
Special Revenue - Housing 106
Special Revenue - Library District 107
Special Revenue - Probation 108
Special Revenue - Public Defense 109
Special Revenue - Public Health 110
Special Revenue - Recreation 111
Special Revenue - Sheriff’s Office 112
Special Revenue - Special Districts 113
Special Revenue - Workforce Investment Act 114
Capital Projects - Special Districts 115
Debt Service - General Government 116
Debt Service - Jail 117
Debt Service - Special Districts 118
Capital Assets Used in the Operation of Governmental Funds:
Comparative Schedules By Source 120
Schedule By Function and Activity 121
Schedule of Changes By Function and Activity 122
Statement of Changes in Assets and Liabilities – Agency Fund 123
Table of Contents
Navajo County
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Year Ended June 30, 2010
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Table of Contents
STATISTICAL SECTION
Financial Trends
Net Assets by Component 127
Changes in Net Assets 129
Fund Balances of Governmental Funds 133
Changes in Fund Balances of Governmental Funds 135
Revenue Capacity
Assessed Value and Estimated Actual Value of Taxable Property 137
Direct and Overlapping Tax Rates 138
Principal Property Taxpayers 139
Property Tax Levies and Collections 140
Debt Capacity
Ratios of Outstanding Debt by Type 141
Legal Debt Margin Information 142
Pledged Revenue Coverage 143
Demographic and Economic Information
Demographic and Economic Statistics 144
Employment by Sector/Major Employers 145
Operating Information
Full -Time Equivalent Employees by Function 146
Operating Indicators by Function 147
Capital Asset Statistics by Function 148
10
To the Honorable Board of Supervisors and Citizens of Navajo County, Arizona:
We are pleased to provide you the Comprehensive Annual Financial Report (CAFR) for Navajo County for the fiscal year ended June 30, 2010. The CAFR provides in depth information regarding the County’s financial position. Navajo County presents the CAFR prepared in compliance with generally accepted accounting principles and audited using generally accepted auditing standards by the Arizona Office of the Auditor General.
This report consists of management’s representations concerning the finances of Navajo County. Consequently, management assumes full responsibility for the completeness and reliability of the information presented in this report. To provide a reasonable basis for making these representations, management of the County has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for preparation of the County’s financial statements in conformity with generally accepted accounting principles (GAAP). Because the cost of internal controls should not exceed the anticipated benefits, the objective of this framework is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements.
The Arizona Office of the Auditor General has audited the County’s financial statements. The goal of the independent audit was to provide reasonable assurance that the financial statements of the County for the fiscal year ended June 30, 2010 are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded based upon the audit; that there was a reasonable basis for rendering an unqualified opinion that the County’s financial statements for the fiscal year ended June 30, 2010 , are fairly presented in conformity with GAAP. The Independent Auditors report is presented at the beginning of the Financial Section of this report.
This report is prepared in accordance with generally accepted accounting principles, in conformance with standards of financial reporting established by the Governmental Accounting Standards Board (GASB), and using the guidelines established by the Government Finance Officers Association of the United States and Canada (GFOA). GAAP requires that management provide an overview and analysis to accompany the basic financial statements, called the Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The MD&A immediately follows the Independent Auditors’ Report in the Financial Section of this report.
Navajo County ADMINISTRATION
W. James Menlove, CPA
Finance Director
James G. Jayne
County manager 11
The Comprehensive Annual Financial Report consists of three sections:
Introductory Section which includes the Letter of Transmittal.
Financial Section which includes the Independent Auditors’ Report, Management’s Discussion and Analysis, basic financial statements, notes to the financial statements, other required supplementary information, and combining and individual fund statements and schedules.
Statistical Section which presents comprehensive statistical data on the County’s financial, economic, and demographic characteristics.
NAVAJO COUNTY PROFILE
Navajo County was formed on March 21, 1895 and encompasses 9,953 square miles. The diversity of Navajo County is evident not only in it’s population but also in its landscape. Northern Navajo County is home to the Navajo and Hopi Tribes, and is known for scenic attractions such as Monument Valley. The middle part of Navajo County is where the county seat is located, in Holbrook. Holbrook became the county seat in 1871. Southern Navajo County is home to the White Mountain Apache Tribe and many picturesque lakes and forests.
The 2009 population of the County was estimated to be 112,975. The principal industries are tourism, coal mining, manufacturing, timber production and ranching.
Navajo County’s government consists of an elected Board of Supervisors. There are five districts with one supervisor representing each district. As governed by statute, the Board of Supervisors is responsible for the overall management and approval of the departmental budgets and tax rates. The Board appoints a County Manager and each department is headed by an elected official, appointed official or a department director. Elected offices are statutorily determined and include the Assessor, Clerk of the Superior Court, Constables, County Attorney, Sheriff, Recorder, Superintendent of Schools, Treasurer and the Judiciary.
Navajo County provides a full range of services including law enforcement and public safety, judicial and detention services, health services, highway construction/maintenance, education and library services.
The financial reporting entity includes all the funds of the primary government and it’s component units. Component units are legally separate entities for which the primary government is financially accountable. Blended component units although legally separate entities, are, in substance part of the County’s operations. Additional information on Navajo County’s blended component units can be found in the notes to the financial statements Note 1.
Navajo County ADMINISTRATION
W. James Menlove, CPA
Finance Director
James G. Jayne
County manager 12
The Board of Supervisors and the County Manager use the financial policies, budget management policies
and strategic priorities to guide the overall development of the budget. On an annual basis, beginning in
January the Finance Department, under the direction of the County Manager, meet with all elected oficials
and department directors and outline the Board’s adopted budget guidelines. Each department must
provide revenue and expenditure estimates for the remainder of the current fiscal year and planned
revenues and expenditures for the following year. These estimates are used by the budget team to assist
in the updating of the five-year financial plan.
The final budget must be adopted by the Board of Supervisors on or before the third Monday in August.
The tax rate and levy must also be set on or before the third Monday in August. The final Adopted Budget
cannot exceed the total of the Tentative Budget.
FACTORS AFFECTING NAVAJO COUNTY’S FINANCIAL CONDITION
The information presented in the financial statements is best understood when it is considered from the
broader perspective of the specific environment within which the County operates.
Local Economy. Navajo County has experienced a 15.9% growth in population from 2000 through 2009.
The major cities and towns in Navajo County account for a large portion of the overall increase.
(information on the 3 tribal lands was not available):
Some of the major employers in Navajo
County include Catalysts (formerly
Abitibi Consolidated) - Snowflake,
Arizona Public Service - Joseph City,
Burlington Northern Santa Fe Railway -
Winslow, Summit Healthcare - Show
Low, and Northland Pioneer College -
Holbrook.
The State of Arizona has been
struggling to balance budget deficits in
the face of declining revenues. All of Arizona’s counties have been impacted by the reduced revenues at
the state and local levels, as well as cost shifts imposed by the state.
Major Cities/Communities 1990 2008 % increase
Show Low 5019 12346 146%
Pinetop-Lakeside 2422 4522 87%
Taylor 2418 4182 73%
Snowflake 3679 5686 55%
Winslow 8190 9833 20%
Holbrook 4686 5083 8%
White Mtn Apache Tribe 10394 N/A
Hopi Tribe 7360 N/A
Kayenta, Navajo Nation 4372 N/A
Source: Arizona Department of Commerce: http://www.census.gov/
Navajo County ADMINISTRATION
W. James Menlove, CPA
Finance Director
James G. Jayne
County manager
13
Navajo County ADMINISTRATION
Long-Term Financial Planning. In November 2006, Navajo County voters approved Proposition 400 which restated the base year expenditure limitation. The expenditure limit is a constraint on the county’s annual spending that was added to the Arizona Constitution in 1980. The limit is based on the county’s actual 1980 expenditures and is adjusted each year for population growth and inflation. Basically, the service level provided in 1980—the base year—is the benchmark for spending on today’s essential services. Navajo County elected officials agreed that the expenditure limit, based on 1980 service levels, was not sufficient to meet the current demand for basic public services.
Proposition 400 allowed the County to restate the base year expenditure limit which allowed for the allocation of resources to:
 Public Safety - Increased law enforcement coverage and availability.
 Transportation - Additional investment in transportation infrastructure.
 Access to Services - Improvement of facilities and satellite offices to provide more accessible government services.
 Quality Work Force - Focus on retention of staff, which reduced training and operational costs as employee turnover was greatly reduced.
The proactive decision making of the Board of Supervisors has allowed Navajo County to better plan for the long-term financial sustainability of the county. Sound fiscal and budget management policies allow the County to better respond to the economic challenges that we face currently and in the future.
Among the current challenges is a significant decline in the three major revenues sources; State Shared Sales Tax, County Sales Tax and General Fund Vehicle License Tax (VLT). Since 2008, State Shared Sales Tax has decreased 18.5%, County Sales Tax by 20% and General Fund VLT by 12.7%.
Impact of State Economic Condition. The downturn in the local economy corresponds to economic declines at the state and national levels. As the State of Arizona struggles to balance their budget and reduce expenses the counties have been significantly impacted by the shifting of revenues away from the County while mandating counties to pay for state programs. The uncertainty of these impacts from year to year requires Navajo County to budget conservatively to handle these cost shifts, reductions in program funding and reduced revenue allocations.
Navajo County continues to work with State Legislators and the County Supervisors Association to find solutions to the state budget crisis with the least impact to counties.
W. James Menlove, CPA
Finance Director
James G. Jayne
County manager 14
Additionally Navajo County continues to seek alternate funding sources to increase revenues. Cost analysis is ongoing and the county is seeking to find ways to further reduce spending while continuing to provide for mandated functions with excellent customer service.
Economic Outlook. Economists are predicting an end to the recession near the end of 2011, with a very modest recovery during 2012. Arizona was among the states hardest hit by the economic downturn with any recovery lagging behind the recovery on a national level. The weakness in the economy and the uncertainty of the state budget requires continual monitoring and planning for Navajo County. We will continue to address these challenges through the strategic budget planning process in coordination with our Elected Officials and Department Directors.
SIGNIFICANT FINANCIAL POLICIES
Navajo County has developed a set of fiscal management policies which guide the budget recommendations. These policies consist of: Operating Budget Policy, Capital Budget Policy, Revenue Policy, Reserve Policy, Debt Policy, and the Budget Management Policy.
The policies have been developed to:
 Provide accountability to the citizens and the Board of Supervisors.
 Provide guidelines for long-term financial stability, enhancing the County’s ability to withstand fiscal fluctuations at the national, state and local levels.
 Provide an overall financial picture of the County as a whole.
 Provide a basis for incorporating long-term policies into day to day operations.
AWARDS
On June 8th 2010, the Government Finance Officers Association Distinguished Budget Presentation Award was presented to the Board of Supervisors for Fiscal Year 2009. We have submitted our 2010 budget for review and anticipate receiving the award for the second consecutive year. To qualify for the award, the County’s budget will be reviewed and judged as a policy document, a fiscal plan, an operations guide and a communication device.
Navajo County ADMINISTRATION
W. James Menlove, CPA
Finance Director
James G. Jayne
County manager 15
ACKNOWLEDGMENTS
Preparation of this report could only be accomplished through the coordinated efforts of the staff of the Finance Department, the cooperative and willing assistance provided by our Elected Officials and Department Directors and the competent service of the Arizona Office of the Auditor General.
We wish to thank the Navajo County Board of Supervisors for their leadership and commitment to Navajo County and our citizens.
Respectfully submitted,
___________________________________ ____________________________________
James G. Jayne James Menlove, CPA
County Manager Finance Director
Navajo County ADMINISTRATION
W. James Menlove, CPA
Finance Director
James G. Jayne
County manager Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
16
Voters
NAVAJO COUNTY
BOARD OF SUPERVISORS
County Manager
Administration
Legal Defender
Information
Technology Director
Facilities
Management
Director
Clerk of the Board
of Supervisors
Public Works
Director
Public Defender
Human Resources
Director
Workforce
Investment Act
Executive Director
Library District
Director
Finance Director
Elections Director
Public Fiduciary
Health Director
Presiding Judge
Judicial Branch
Justice of the Peace
Winslow Justice
Court
Juvenile Director
Judicial Branch
Justice of the Peace
Pinetop Justice
Court
Justice of the Peace
Snowflake Justice
Court
Superior Court Judge
Judicial Branch
Chief Probation
Officer
Judicial Branch
Court Administrator
Superior Court
Superior Court
Judge
Judicial Branch
Justice of the Peace
Holbrook Jjustice
Court
Justice of the Peace
Show Low Justice
Court
Justice of the Peace
Kayenta Justice
Court
Superior Court Judge
Judicial Branch
County Attorney
County Assessor
County Sheriff
Clerk of the Court
County Recorder
Superintendent of
Schools
County Treasurer
Constable
Holbrook
Constable
Snowflake
Constable
Kayenta
Constable
Winslow
Constable
Show Low
Constable
Pinetop
North Eastern
Arizona Training
Center Manager
Assistant County
Manager
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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17
Jonathan M. Nez
District 1
Jesse Thompson
District 2
J.R. DeSpain
District 3
David Tenney
District 4
Jerry Brownlow
District 5
James G. Jayne
County Manager
E.L. “Dusty” parsons
Assistant County Manager
James Menlove, Finance Director M a ry Jane Springer, Deputy Finance Director Cris Parisot, Senior Accountant
Prepared by Navajo County Finance Department
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Comprehensive annual financial report
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FINANCIAL section
20
21
22
Management’s Discussion and Analysis
As management of Navajo County, we offer readers of Navajo County’s financial statements this narrative overview and analysis of the financial activities of Navajo County for the fiscal year ended June 30, 2010. We encourage readers to consider the information presented here in conjunction with the financial statements.
Financial Highlights
 The assets of the County exceeded its liabilities at the close of the current fiscal year by $105.3 million (net assets). Of this amount, $16.2 million (unrestricted net assets) may be used to meet the government’s ongoing obligations to citizens and creditors.
 The total decrease in the County’s net assets was $2.5 million in fiscal year 2010.
 At the close of fiscal year 2010, the County’s governmental funds reported combined ending fund balances of $41.4 million, an increase of $2.5 million in comparison with the prior year’s balances of $38.9 million. Approximately 97.9 percent of the fund balances, $40.5 million, is unreserved fund balances available for spending at the County’s discretion.
 At the end of the current fiscal year, unreserved fund balances for the general fund were $7.4 million, or 20.2 percent, of total general fund expenditures.
Overview of the Financial Statements
This discussion and analysis is intended to serve as an introduction to the County’s basic financial statements. The County’s basic financial statements comprise three components:
1. Government-wide financial statements,
2. Fund financial statements, and
3. Notes to the financial statements.
This report also contains other required supplementary information in addition to the basic financial statements.
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR 23
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR
Government-wide financial statements
The government-wide financial statements are designed to provide readers with a broad overview of the County’s finances in a manner similar to a private sector business.
One of the most important questions asked about the County’s finances is, ―Is the County as a whole better off or worse as a result of this year’s activities?‖ The Statement of Net Assets and the Statement of Activities report information about the County as a whole and about its activities in a way that helps answer this question. These statements include all nonfiduciary assets and liabilities using the accrual basis of accounting.
The Statement of Net Assets presents information on all of the County’s assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the County is improving or deteriorating. In addition to this change, other nonfinancial factors will need to be considered.
The Statement of Activities presents information showing how net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Therefore, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation leave.
All of the County’s basic services are considered to be governmental activities, including general government, public safety, highways and streets, health and welfare, culture and recreation, education, environmental and conservation, and urban redevelopment and housing. Sales taxes, property taxes, intergovernmental revenues, and user fees finance most of these activities. The government-wide financial statements can be found on pages 32 through 33 of this report. 24
Fund financial statements
The fund financial statements provide detailed information about the most significant county funds—not the County as a whole. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. Some funds are required to be established by state law or by bond covenants. However, the Board of Supervisors established many other funds to help it control and manage money for particular purposes or to show that it is meeting legal responsibilities for using certain taxes, grants, and other money. All of the County’s funds can be divided into three categories: governmental, proprietary and fiduciary.
Governmental funds—Most of the County’s basic services are reported in governmental funds, which focus on near-term inflows and outflows of spendable resources and the balances of spendable resources available at year-end. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the County’s operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the County’s programs.
Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for the governmental funds with similar information presented for the governmental activities in the government-wide financial statements. Reconciliations between governmental activities as reported in the Statement of Net Assets and the Statement of Activities and the governmental funds as reported in the fund financial statements are provided to facilitate this comparison.
The County maintains numerous individual governmental funds. Information is presented separately in the governmental funds balance sheets and in the governmental funds statements of revenues, expenditures, and changes in fund balances for the General Fund, Public Works/HURF Fund, and the Flood Control District Fund, which are considered major funds. Data from the other governmental funds is combined into a single aggregated presentation. The governmental fund financial statements can be found on pages 34 through 37 of this report.
Proprietary funds—The County uses one type of proprietary fund, an internal service fund, to account for self-insured employee benefits provided to county departments on a cost-reimbursement basis. At the beginning of the year, the County transferred the assets and liabilities of the internal
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR 25
service fund to the General Fund because the County terminated the self-insured employee benefits trust when it joined a pooled trust to provide these benefits. The proprietary fund financial statements can be found on pages 38 and 39 of this report. Also, see Note 8 - Risk management for more information.
Fiduciary funds—Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the County’s programs. The fiduciary funds financial statements can be found on pages 40 through 41 of this report.
Notes to the financial statements—The notes to the financial statements provide additional information that is essential to fully understand the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 42 through 77 of this report.
Required supplementary information—In addition to the basic financial statements and accompanying notes, the report presents required supplementary information on the County’s budgeting and budgetary control and the County’s progress in funding its obligation to provide pension benefits to its employees. Other required supplementary information can be found on pages 80 through 88 of this report.
Other information—The combining statements in connection with nonmajor governmental funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules including statistical information can be found on pages 89 through 148 of this report.
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR
Government-wide Financial Analysis
Net Assets
Net assets may serve over time as a useful indicator of a County’s financial position. The following table reflects the condensed Statement of Net Assets of the County as of June 30, 2010, compared to the prior year. 26
The County’s net assets from governmental activities at the end of the fiscal year were $105.3 million. The decrease of $2.5 million is primarily due to a net reduction in capital assets.
A large portion of the County’s net assets, 62.7 percent ($66.0 million), reflects its investment in capital assets net of accumulated depreciation and related debt. The County uses these assets to provide services to citizens and, therefore, they are not available for future spending.
21.9 percent of the County’s net assets ($23.0 million) are subject to external restrictions on how they may be used. The County’s restricted net assets increased by 21.0 percent ($4.0 million) in the current fiscal year due to revenues exceeding expenditures in the Public Works/HURF and Flood Control District Funds in the current fiscal year.
The remaining balance of the County’s net assets, 15.4 percent ($16.2 million), is unrestricted and may be used to meet the County’s ongoing obligations to citizens and creditors without constraints established by debt covenants or other legal requirements.
Governmental Activities
2010
2009
Current and other assets
$ 45,374,572
$ 44,391,020
Capital assets
78,655,616
82,838,534
Total assets
124,030,188
127,229,554
Other liabilities
3,410,645
3,345,524
Long-term liabilities outstanding
15,339,191
16,107,326
Total liabilities
18,749,836
19,452,850
Net Assets:
Invested in capital assets, net of related debt
66,038,408
73,728,006
Restricted
23,034,928
19,040,878
Unrestricted
16,207,016
15,007,820
Total net assets
$105,280,352
$107,776,704
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR 27
Change in Net Assets
The Statement of Activities presents information on how the County’s net assets changed during the most current fiscal year. The following table reflects the condensed Statement of Activities of the County for the fiscal year 2010 compared to the prior year:
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR
Overall revenues decreased by 2.3 percent and program expenses increased by 6.0 percent in the current fiscal year.
Governmental Activities
2010
2009
Program revenues:
Charges for services
$ 4,303,509
$ 4,360,848
Operating grants and contributions
13,539,596
15,300,801
Capital grants and contributions
15,637,667
12,393,158
Total program revenues
33,480,772
32,054,807
General revenues:
Property taxes
12,494,737
10,933,578
Sales taxes
5,480,598
6,330,588
State shared revenues
10,728,725
12,017,517
Grants and contributions not restricted to specific programs
4,902,289
6,444,858
Investment earnings
322,748
750,742
Gain on disposal of capital assets
115,237
23,895
Miscellaneous
1,273,310
1,466,751
Transfers
(380,236)
-
Total general revenues and transfers
34,937,408
37,967,929
Total revenues
68,418,180
70,022,736
Governmental Activities
2010
2009
Program expenses:
General government
$ 22,647,297
$ 19,392,043
Public safety
17,566,896
19,182,119
Highways and streets
13,057,318
14,058,305
Health and welfare
9,366,578
7,219,915
Culture and recreation
747,065
510,035
Education
6,307,885
5,723,104
Environmental and conservation
237,032
231,225
Urban redevelopment and housing
307,208
-
Interest on long-term debt
677,253
594,260
Total program expenses
70,914,532
66,911,006
Change in net assets
(2,496,352)
3,111,730
Net assets, beginning
107,776,704
104,664,974
Net assets, ending
$105,280,352
$107,776,704 28
Operating grants and contributions decreased by $1.8 million, or 11.5 percent, in the current year due to a decrease in general fund state government grants.
Capital grants and contributions increased by $3.2 million, or 26.2 percent, in the current year due to construction of the Lone Pine Dam Bridge and an intergovernmental agreement with the Navajo Nation for construction of road yard facilities.
Property taxes increased by $1.6 million, or 14.3 percent, due to the increase in assessed valuation and increase in levy as allowed by statute.
Local sales taxes decreased by $0.8 million, or 13.4 percent, due to the poor economic conditions.
State shared revenues decreased by $1.3 million, or 10.7 percent, in the current year due to the recession and general economic downturn in the national and state economies.
Grants and contributions not restricted to specific programs decreased by $1.5 million, or 23.9 percent, in the current year due to a decrease in federal grant revenues.
General government expenses increased by $3.3 million, or 16.8 percent, in the current fiscal year due to the County discontinuing the self-funded health insurance trust and participating in the Arizona Public Employers Health Pool in the current year.
Health and welfare expenses increased by $2.1 million, or 29.7 percent, in the current fiscal year due to the construction of a Public Health Services District facility in the southern part of the county.
Financial Analysis of the County’s Funds
The County reported three major funds for this fiscal year: the General Fund, Public Works/HURF Fund, and the Flood Control District Fund. At year-end, the County’s governmental funds reported combined fund balances of $41.4 million, which is an increase of $2.5 million from last year or a change of 6.4 percent. Of the total, $40.5 million constitutes unreserved fund balances.
Revenues for governmental functions overall decreased by $1.8 million from last year, a decrease of 2.6 percent, and expenditures for governmental functions decreased by about $8.8 million from last year, a decrease of 11.7 percent in the current fiscal year. Governmental function revenues exceeded expenditures by $1.1 million in the current fiscal year.
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR 29
The General Fund is the County’s primary operating fund. At the end of the current fiscal year, the unreserved fund balances of the General Fund totaled $7.4 million. Unreserved fund balances represents 20.2 percent of total General Fund expenditures. This ratio indicates a strong fund balance position in comparison to expenditures. The General Fund’s unreserved fund balances decreased by $.1 million from last year, a decrease of 1.8 percent in the current fiscal year. The primary factor for the decrease was due to declining economic conditions.
The Public Works/HURF Fund’s fund balances increased by $4.9 million from last year, an increase of 65.4 percent in the current fiscal year. The primary factor for the increase was due to the delay of certain capital improvement projects.
The Flood Control District Fund’s fund balance increased by $1.7 million from last year, or 24.0 percent, in the current fiscal year. The primary factor for the increase was due to revenues exceeding expenditures. The County is accumulating financial resources for the future rehabilitation of the Winslow levy and other planned flood control projects.
General Fund Budgetary Highlights
For the General Fund, actual revenues were less than the original and final budget amounts by $.3 million while the actual expenditures were $11.1 million less than the amount budgeted. The budget variance for expenditures in the General Fund was primarily due to conservative budgeting practices and reduced spending due to declining economic conditions.
Capital Assets and Debt Administration
Capital Assets
During the current fiscal year, the net book value of capital assets being depreciated decreased by $4.3 million. Additional information on capital assets can be found in Notes 5 and 6 on pages 56 and 57 of this report.
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR 30
Navajo County Finance Department
W. James Menlove, CPA
FINANCE DIRECTOR
Debt Administration
At the end of the current fiscal year, the County had total long-term liabilities outstanding of $15.3 million, which included certificates of participation outstanding of $5.0 million that financed the construction of jail facilities and $6.3 million in revenue bonds that financed the acquisition, construction, and improvements of county buildings and facilities. Included in long-term liabilities is $1.5 million of special assessment debt with governmental commitment and $2.5 million for the future payment of compensated absences for unused employee vacation and sick leave. The remainder of the long-term liabilities consists of capital leases, and estimated landfill closure and post-closure care costs. There were no significant changes to the County’s credit ratings or debt limitations during the current fiscal year. Additional information on long-term debt can be found in Note 7 on pages 58 through 62 of this report.
Economic Factors and Next Year’s Budget
There has been a significant downturn in the national and state economy beginning in the latter part of 2008. Certain economists are predicting an end to the recession at the end of 2011 with a very modest recovery during 2012. The County remains in a strong financial position and has adequate cash reserves. The County continues to closely monitor revenues and applicable economic indicators to ensure that the County remains fiscally strong. The County continues to budget conservatively for revenue estimates and other factors affecting the County.
Requests for Information
This financial report is designed to provide a general overview of the County’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Navajo County Finance Department, P.O. Box 668, 100 Code Talker Drive, Holbrook, AZ 86025.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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Basic financial statements
Navajo County
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Governmental
Activities
Assets
Cash and investments $ 37,853,647
Cash and investments held by trustee 1,276,107
Receivables (net of allowance for uncollectibles):
Property taxes 764,062
Accrued interest 50,785
Due from other governments 4,202,087
Inventories 528,878
Prepaid items 45,569
Restricted assets:
Cash and investments held by trustee 653,437
Capital assets, not being depreciated 12,104,757
Capital assets, being depreciated, net 66,550,859
Total assets 124,030,188
Liabilities
Accounts payable 2,321,277
Accrued payroll and employee benefits 1,069,944
Due to other governments 19,424
Noncurrent liabilities
Due within 1 year 2,836,470
Due in more than 1 year 12,502,721
Total liabilities 18,749,836
Net Assets
Invested in capital assets, net of related debt 66,038,408
Restricted for:
Highways and streets 12,132,684
Public safety 8,575,954
Debt service 1,924,862
Capital projects 401,428
Unrestricted 16,207,016
Total net assets $ 105,280,352
Statement of Net Assets
See accompanying notes to financial statements
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Year Ended June 30, 2010
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Program Revenues Net (Expense)
Operating Capital Revenue and
Charges for Grants and Grants and Changes in
Functions/Programs Expenses Services Contributions Contributions Net Assets
Primary government:
Governmental activities:
General government $22,647,297 $3,531,064 $1,735,327 ($17,380,906)
Public safety 17,566,896 517,702 3,290,457 (13,758,737)
Highways and streets 13,057,318 39,249 $15,637,667 2,619,598
Health and welfare 9,366,578 215,494 1,803,890 (7,347,194)
Culture and recreation 747,065 122,207 (624,858)
Education 6,307,885 6,086,494 (221,391)
Environmental and conservation 237,032 195,574 (41,458)
Urban redevelopment and housing 307,208 305,647 (1,561)
Interest on long-term debt 677,253 (677,253)
Total governmental activities $70,914,532 $4,303,509 $13,539,596 $15,637,667 ($37,433,760)
General revenues:
Property taxes, levied for general purpose $6,464,630
2,742,387
2,148,297
Property taxes, levied for library district 547,247
Property taxes, levied for white mountain lake recreation district 154,333
Property taxes, levied for special districts 437,843
General county sales tax 5,480,598
Shared revenues - state sales tax 8,732,190
Shared revenues - state vehicle license tax 1,996,535
Grants and contributions not restricted to specific programs 4,902,289
Investment earnings 322,748
Gain on disposal of capital assets 115,237
Miscellaneous 1,273,310
Transfers (380,236)
Total general revenues and transfers 34,937,408
Change in net assets (2,496,352)
107,776,704
Net assets, June 30, 2010 $105,280,352
Net assets, July 1, 2009
Statement of Activities
Taxes:
Property taxes, levied for flood control
Property taxes, levied for public health district
See accompanying notes to financial statements
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Year Ended June 30, 2010
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Flood Other Total
General Public Works/ Control Governmental Governmental
Fund HURF Fund District Fund Funds Funds
$4,338,628 $12,011,967 $8,839,545 $12,663,507 $37,853,647
325,096 951,011 1,276,107
339,455 189,026 235,581 764,062
7,370 14,459 10,285 18,671 50,785
2,426,916 274,479 256,992 2,958,387
1,822,446 970,639 1,409,002 4,202,087
528,878 - 528,878
45,569 45,569
653,437 653,437
$9,259,911 $13,800,422 $9,038,856 $16,233,770 $48,332,959
$545,855 $1,236,837 $20,088 $518,497 $2,321,277
693,559 132,000 7,749 236,636 1,069,944
19,424 - - 19,424
6,001 - 274,479 2,677,907 2,958,387
252,986 135,678 184,992 573,656
1,517,825 1,368,837 437,994 3,618,032 6,942,688
528,878 528,878
325,096 325,096
7,416,990 7,416,990
Special revenue funds 11,902,707 8,600,862 10,614,544 31,118,113
Capital projects funds 76,332 76,332
Debt service funds 1,924,862 1,924,862
7,742,086 12,431,585 8,600,862 12,615,738 41,390,271
$9,259,911 $13,800,422 $9,038,856 $16,233,770 $48,332,959
Cash and investments
Assets
Balance Sheet
Governmental Funds
Prepaid items
Cash and investments held by trustee
Receivables:
Property taxes
Accrued interest
Due from other funds
Inventories
Due from other governments
Total liabilities
Restricted assets:
Cash and investments held by trustee
Total assets
Liabilities and Fund Balances
Liabilities:
Accounts payable
Accrued payroll and employee benefits
Due to other governments
Due to other funds
Deferred revenues
Fund balances:
Reserved for inventories
Reserved for capital projects
Unreserved, reported in:
General Fund
Total fund balances
Total liabilities and fund balances
See accompanying notes to financial statements
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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Fund balances—total governmental funds $ 41,390,271
Amounts reported for governmental activities in the Statement of Net Assets are different
because:
Capital assets used in governmental activites are not
financial resources and therefore, are not reported in the
funds. 78,655,616
Some receivables are not available to pay for current-period
expenditures and therefore, are deferred in the funds. 573,656
Some liabilities, including bonds and certificates of participation payable,
are not due and payable in the current period and therefore are not
reported in the funds. (15,339,191)
Net assets of governmental activities $ 105,280,352
Reconciliation of the Balance Sheet to the Statement of Net Assets
Governmental Funds
See accompanying notes to financial statements
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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See accompanying notes to financial statements
Flood Other Total
General Public Works/ Control Governmental Governmental
Fund HURF Fund District Fund Funds Funds
Revenues:
Property taxes $6,397,385 $2,742,386 $3,154,537 $12,294,308
Licenses and permits 454,494 165,169 619,663
Fines and forfreits 1,087,357 249,245 1,336,602
Intergovernmental 20,545,394 $15,032,384 14,074,675 49,652,453
Charges for services 1,012,452 39,249 1,295,544 2,347,245
Investment earnings 76,000 81,289 66,694 98,764 322,747
Special assessments 133,181 133,181
Contributions 31,141 31,141
Miscellaneous 519,338 235,037 518,936 1,273,311
Total revenues 30,092,420 15,387,959 2,809,080 19,721,192 68,010,651
Expenditures:
Current:
General government 18,130,072 3,531,680 21,661,752
Public safety 12,226,372 817,477 3,794,278 16,838,127
Highways and streets 9,888,985 198,844 10,087,829
Health and welfare 3,271,809 6,034,991 9,306,800
Culture and recreation 740,591 740,591
Education 323,717 5,815,346 6,139,063
Environmental and conservation 237,032 237,032
Urban redevelopment and housing 307,208 307,208
Debt service:
Principal 858,416 858,416
Interest and other charges 677,253 677,253
Capital outlay 81,675 81,675
Total expenditures 34,033,645 9,888,985 817,477 22,195,639 66,935,746
Excess (deficiency) of revenues over expenditures (3,941,225) 5,498,974 1,991,603 (2,474,447) 1,074,905
Other financing sources (uses):
Sale of capital assets 95,036 20,201 115,237
Transfers in 3,873,834 142,240 4,032,407 8,048,481
Transfers out (2,718,933) (787,506) (327,996) (2,955,167) (6,789,602)
Total other financing sources and uses 1,249,937 (625,065) (327,996) 1,077,240 1,374,116
Net change in fund balances (2,691,288) 4,873,909 1,663,607 (1,397,207) 2,449,021
Fund balances, July 1, 2009 10,433,374 7,516,396 6,937,255 14,012,945 38,899,970
Increase in reserve for inventories 41,280 41,280
Fund balances, June 30, 2010 $7,742,086 $12,431,585 $8,600,862 $12,615,738 $41,390,271
Statement of Revenues, Expenditures, and Changes in Fund Balances
Governmental Funds
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Year Ended June 30, 2010
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See accompanying notes to financial statements
Net change in fund balances—total governmental funds $ 2,449,021
Amounts reported for governmental activities in the Statement of Activities are
different because:
Governmental funds report capital outlays as expenditures. However, in the
Statement of Activities the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense.
Capital outlay 1,768,636
Depreciation expense (5,421,547) (3,652,911)
Collections of revenues in governmental funds exceeded revenues reported in the
Statement of Activities (462,762)
Debt proceeds provide current financial resources to governmental funds, but
issuing debt increases long-term liabilities in the Statement of Net Assets.
Repayment of debt principal is an expenditure in the governmental funds
but the repayment reduces long-term liabilities in the Statement of Net Assets.
Principal repaid 858,416
Under the modified accrual basis of accounting used in the governmental funds,
expenditures are not recognized for transactions that are not normally paid with
expendable available resources. In the Statement of Activities, however, which is
presented on the accrual basis of accounting, expenses are reported
regardless of when the financial resources are available.
Increase in compensated absences (91,005)
Decrease in landfill closure and post-closure care costs 724 (90,281)
Some cash outlalys, such as purchases of inventories, are reported as expenditures
in the governmental funds when purchased. In the Statement of Activities, however,
they are reported as expenses when consumed.
Increase in inventories 41,280
Net transfers of the internal service funds assets and liabilities are
reported in the governmental funds to record the close-out of the fund during the year. (1,639,115)
Change in net assets of governmental activities $ (2,496,352)
Reconciliation of the Statement of Revenues, Expenditures,
and Changes in Fund Balances to the Statement of Activities
Governmental Funds
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Year Ended June 30, 2010
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See accompanying notes to financial statements
Governmental
Activities -
Internal Service Fund
Transfers in (out):
Transfers in $ 550,000
Transfers out (2,189,115)
Net transfers out (1,639,115)
Decrease in net assets (1,639,115)
Net Assets, July 1, 2009 1,639,115
Net Assets, June 30, 2010 $ -
Statement of Revenues, Expenditures, and Changes in Fund Net Assets
Proprietary Funds
Navajo County
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Year Ended June 30, 2010
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See accompanying notes to financial statements
Governmental
Activities -
Internal Service Fund
Cash flows from noncapital financing activities:
Cash transfers to other funds $ (2,187,577)
Net cash used by noncapital financing activities (2,187,577)
Net decrease in cash and cash equivalents (2,187,577)
Cash and cash equivalents, July 1, 2009 2,187,577
Cash and cash equivalents, June 30, 2010 -
Schedule of Noncash Investing, Capital and Noncapital Activities
Transfer out of accrued interest to General Fund 1,538
Accrued interest transferred to General Fund (1,538)
Claims payable transferred to General Fund 550,000
Transfer of claims payable to General Fund (550,000)
Net total $ -
Statement of Cash Flows
Proprietary Funds
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Year Ended June 30, 2010
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40
See accompanying notes to financial statements
Investment Trust
Funds Agency Funds
Cash and investments $ 105,297,219 $ 4,434,108
167,670 20,876
$ 105,464,889 $ 4,454,984
$ 3,717,744
737,240
$ 4,454,984
Held in trust for investment trust particpants $ 105,464,889
Statement of Fiduciary Net Assets
Fiduciary Funds
Assets
Total assets
Interest receivable
Liabilities
Due to other governments
Deposits held for others
Total liabilities
Net Assets
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Year Ended June 30, 2010
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See accompanying notes to financial statements
Investment Trust
Funds
$ 245,347,579
778,759
246,126,338
228,602,614
17,523,724
87,941,165
$ 105,464,889
Statement of Changes in Fiduciary Net Assets
Fiduciary Funds
Additions:
Contributions from participants
Net investment income
Net assets, July 1, 2009
Net assets, June 30, 2010
Total additions
Deductions:
Distributions to participants
Change in net assets
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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Note 1 - Summary of Significant Accounting Policies
The accounting policies of Navajo County conform to generally accepted accounting
principles applicable to governmental units adopted by the Governmental Accounting
Standards Board (GASB).
For the year ended June 30, 2010, the County implemented the provision of GASB
Statement No. 51, Accounting and Financial Reporting for Intangible Assets. GASB
Statement No. 51 establishes accounting and financial reporting requirements for
intangible assets. The implementation of this Statement did not have a material effect
on the County’s financial statements.
A. Reporting Entity
The County is a general purpose local government that is governed by a separately
elected board of five county supervisors. The accompanying financial statements
present the activities of the County (the primary government) and its component units.
Component units are legally separate entities for which the County is considered to be
financially accountable. Blended component units, although legally separate entities,
are in substance part of the County’s operations. Therefore, data from these units is
combined with data of the primary government. Discretely presented component units,
on the other hand, are reported in a separate column in the government-wide financial
statements to emphasize they are legally separate from the County. Each blended
component unit discussed below has a June 30 year-end. The County has no discretely
presented component units.
Notes to Financial Statements
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Year Ended June 30, 2010
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Notes to Financial Statements
Component Unit
Description; Criteria for Inclusion
Reporting
Method
For Separate
Financial
Statements
Navajo County
Flood Control
District
A tax-levying district that provides flood
control systems; the County’s Board of
Supervisors serves as the board of
directors
Blended
Not available
Navajo County
Library District
A tax-levying district that provides and
maintains library services for the County’s
residents; the County’s Board of
Supervisors serves as the board of
directors
Blended Not available
Navajo County
Health District
A tax-levying district that provides health
services for the County’s residents; the
County’s Board of Supervisors serves as
the board of directors
Blended Not available
White Mountain
Lake Recreation
District
A tax-levying district that provides for
recreational services for the White
Mountain Lake Community; the County’s
Board of Supervisors serves as the board
of directors
Blended Not available
Navajo County
Municipal Property
Corporation
A nonprofit corporation that assists in the
acquisition of tangible real and personal
property; exists only to serve the County
Blended Not available
Navajo County
Special
Assessment
Districts
Legally separate entities that provide
improvements to various properties within
the County; the County’s Board of
Supervisors serves as the board of
directors
Blended Not available
The following table describes the County’s component units:
Navajo County
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Notes to Financial Statements
The Navajo County Municipal Property Corporation was formed to finance the construction
of the Navajo County Jail Facility. Because the County’s Board of Supervisors serves as
the Board of Directors for this corporation, it is reported as a blended component unit of the
County. The Corporation issued certificates of participation that evidenced undivided
proportionate interests in rent payments to be made under a lease agreement, with an
option to purchase, between Navajo County and the Corporation. Since this debt is in
substance the County’s obligation, these liabilities and resulting assets are reported in the
government-wide statement of net assets.
B. Basis of Presentation
The basic financial statements include both government-wide statements and fund financial
statements. The government-wide statements focus on the County as a whole, while the
fund financial statements focus on major funds. Each presentation provides valuable
information that can be analyzed and compared between years and between governments
to enhance the usefulness of the information.
Government-wide statements—Provide information about the primary government (the
County) and its component units. The statements include a statement of net assets and a
statement of activities. These statements report the financial activities of the overall
government, except for fiduciary activities. Governmental activities generally are financed
through taxes and intergovernmental revenues.
A statement of activities presents a comparison between direct expenses and program
revenues for each function of the County’s governmental activities. Direct expenses are
those that are specifically associated with a program or function and, therefore, are clearly
identifiable to a particular function. The County allocates indirect expenses to the Public
Works/HURF and Flood Control District funds. Program revenues include:
 charges to customers or applicants for goods, services, or privileges provided,
 operating grants and contributions, and
 capital grants and contributions, including special assessments.
Navajo County
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Notes to Financial Statements
Revenues that are not classified as program revenues, including internally dedicated
resources and all taxes, are reported as general revenues.
Generally, the effect of interfund activity has been eliminated from the government-wide
financial statements to minimize the double-counting of internal activities. However,
charges for interfund services provided and used are not eliminated if the prices
approximate their external exchange values.
Fund financial statements—Provide information about the County’s funds, including
fiduciary funds and blended component units. Separate statements are presented for the
governmental and fiduciary fund categories. The emphasis of fund financial statements is
on major governmental funds, each displayed in a separate column. All remaining
governmental funds are aggregated and reported as other governmental funds. Fiduciary
funds are aggregated and reported by fund type.
The County reports the following major governmental funds:
The General Fund is the County’s primary operating fund. It accounts for all financial
resources of the general government, except those required to be accounted for in another
fund.
The Public Works/HURF Fund is used to account for road construction and maintenance of
major and nonmajor regional roads, and is funded by highway user revenues and vehicle
license taxes.
The Flood Control District Fund is used to provide flood control facilities and regulates
floodplains and drainage to prevent flooding of property in Navajo County and is funded by
secondary property taxes.
The County reports the following fund types:
The internal service fund accounts for self-insured employee benefits provided to county
departments on a cost-reimbursement basis.
The investment trust funds account for pooled assets held and invested by the County
Treasurer on behalf of other governmental entities.
The agency funds account for assets held by the County in a fiduciary capacity or as an
agent for individuals, private organizations, the State and various local governments.
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Notes to Financial Statements
C. Basis of Accounting
The government-wide, proprietary fund, and fiduciary fund financial statements are
presented using the economic resources measurement focus, with the exception of
agency funds, and the accrual basis of accounting. The agency funds are custodial in
nature and do not have a measurement focus. Revenues are recorded when earned and
expenses are recorded at the time liabilities are incurred, regardless of when the related
cash flows take place. Property taxes are recognized as revenue in the year for which they
are levied. Grants and donations are recognized as revenue as soon as all eligibility
requirements the provider imposed have been met.
Governmental funds in the fund financial statements are reported using the current
financial resources measurement focus and the modified accrual basis of accounting.
Under this method, revenues are recognized when they become both measurable and
available. The County considers all revenues reported in the governmental funds to be
available if the revenues are collected within 60 days after year-end. The County’s major
revenue sources that are susceptible to accrual are property taxes, intergovernmental, and
charges for services. Expenditures are recorded when the related fund liability is incurred,
except for principal and interest on general long-term debt, claims and judgments,
compensated absences, and landfill closure and postclosure care costs, which are
recognized as expenditures to the extent they are due and payable. General capital asset
acquisitions are reported as expenditures in governmental funds. Issuances of general
long-term debt and acquisitions under capital lease agreements are reported as other
financing sources.
Under the terms of grant agreements, the County funds certain programs by a combination
of grants and general revenues. Therefore, when program expenses are incurred, there
are both restricted and unrestricted net assets available to finance the program. The
County applies grant resources to such programs before using general revenues.
The County’s internal service fund follows FASB Statements and Interpretations issued on
or before November 30, 1989, Accounting Principles Board Opinions, and Accounting
Research Bulletins, unless those pronouncements conflict with GASB pronouncements.
The County has chosen the option not to follow FASB Statements and Interpretations
issued after November 30, 1989.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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47
Notes to Financial Statements
D. Cash and Investments
For the purposes of its statement of cash flows, the County considers cash on hand,
demand deposits, cash on deposit with the County Treasurer, and only those highly liquid
investments with a maturity of 3 months or less when purchased to be cash equivalents.
Nonparticipating interest-earning investment contracts are stated at cost. Money market
investments and participating interest-earning investment contracts with a remaining
maturity of 1 year or less at time of purchase are stated at amortized cost. All other
investments are stated at cost, which approximates fair value.
E. Inventories
The County accounts for its inventories in the governmental funds using the purchase
method. Inventories of the governmental funds consist of expendable supplies held for
consumption and are recorded as expenditures at the time of purchase. Amounts on hand
at year-end are shown on the balance sheet as an asset for informational purposes only
and are offset by a fund balance reserve to indicate that they do not constitute ―available
spendable resources.‖ These inventories are stated at cost using the first-in, first-out
method.
Inventories in the government-wide financial statements are recorded as assets when
purchased and expensed when consumed. These inventories are stated at cost using the
first-in, first-out method.
F. Property Tax Calendar
The County levies real and personal property taxes on or before the third Monday in August
that become due and payable in two equal installments. The first installment is due on the
first day of October and becomes delinquent after the first business day of November. The
second installment is due on the first day of March of the next year and becomes delinquent
after the first business day of May.
A lien assessed against real and personal property attaches on the first day of January
preceding assessment and levy.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
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Notes to Financial Statements
H. Investment Earnings
Investment earnings is composed of interest and dividends.
I. Compensated Absences
Compensated absences payable consists of unused annual and sick leave. Employees may
accumulate up to 488 hours during a calendar year (depending on years of service) with a
maximum carryforward of 320 hours as of December 31 of each year. Upon termination of
employment, all unused vacation benefits up to a maximum of 320 hours (488 upon
retirement) are paid to the employee. Employees may accumulate an unlimited number of
sick leave hours. Generally, sick leave benefits provide for ordinary sick pay and are
cumulative. Upon retirement or death, employees who have accumulated 301 hours or
more of unused sick leave and have 5 or more years of continuous service will receive a
partial sick leave payment, not to exceed $5,000, based on the number of years of
continuous service. Accordingly, annual and vested sick leave benefits are accrued as a
liability in the government-wide financial statements. A liability for these amounts is reported
in the governmental funds’ financial statements only if they have matured, for example, as a
result of employee resignations and retirements by fiscal year-end.
Capitalization
Threshold
Depreciation
Method
Estimated
Useful Life
Land $10,000 N/A N/A
Buildings and improvements 10,000 Straight-line 15-40 years
Machinery and equipment 5,000 Straight-line 3-7 years
Infrastructure 10,000 Straight-line 35 years
G. Capital Assets
Capital assets are reported at actual cost or estimated historical cost if historical records are
not available. Donated assets are reported at estimated fair value at the time received.
Capitalization thresholds (the dollar values above which asset acquisitions are added to the
capital asset accounts), depreciation methods, and estimated useful lives of capital assets
reported in the government-wide statements are as follows:
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
49
Notes to Financial Statements
Note 2 - Stewardship, Compliance, and Accountability
Deficit fund balances—At June 30, 2010, the following funds reported deficit fund bal-ances,
which violate state statutes. The following funds had fund deficits in excess of
$20,000:
These fund deficits resulted either from operations or a carryover deficit from prior
years, but are expected to be corrected through normal operations or through general
fund operating transfers in future years.
Fund Deficit
Governmental Funds:
Special Revenue:
Housing $72,047
Workforce Investment 193,764
Capital Projects:
General Government 122,528
Debt Service:
Special Districts 107,644
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
50
Notes to Financial Statements
Note 3 - Deposits and Investments
Arizona Revised Statutes (A.R.S.) authorize the County to invest public monies in the
State Treasurer’s investment pool; obligations issued or guaranteed by the United
States or any of the senior debt of its agencies, sponsored agencies, corporations,
sponsored corporations, or instrumentalities; specified state and local government
bonds; interest earning investments such as savings accounts, certificates of deposit,
and repurchase agreements in eligible depositories; and specified commercial paper,
bonds, debentures, and notes issued by corporations organized and doing business in
the United States. In addition, the County Treasurer may invest trust funds in fixed
income securities of corporations doing business in the United States or District of
Columbia.
Credit risk
Statutes have the following requirements for credit risk:
1. Commercial paper must be rated P1 by Moody’s investors service or A1 or better
by Standard and Poor’s rating service.
2. Corporate bonds, debentures, and notes must be rated A or better by Moody’s
investors service or Standard and Poor’s rating service.
3. Fixed income securities must carry one of the two highest ratings by Moody’s
investors service and Standard and Poor’s rating service. If only one of the
above-mentioned services rates the security, it must carry the highest rating of
that service.
Custodial credit risk
Statutes require collateral for demand deposit, certificates of deposit, and repurchase
agreements at 101 percent of all deposits not covered by federal depository insurance.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
51
Notes to Financial Statements
Concentration of credit risk
Statutes do not include any requirements for concentration of credit risk.
Interest rate risk
Statutes require that public monies invested in securities and deposits have a
maximum maturity of 5 years and that public operating fund monies invested in
securities and deposits have a maximum maturity of 3 years. Investments in
repurchase agreements must have a maximum maturity of 180 days.
Foreign currency risk
Statutes do not allow foreign investments.
Deposits—At June 30, 2010, the carrying amount of the County’s deposits was
$63,358,846, which primarily consisted of money market and savings accounts, and
the bank balance was $62,379,715. The County’s formal policy is to follow
collateralization requirements set forth in A.R.S. §35-323 as described above.
In November 2008, the FDIC’s Board of Directors established a program called the
Temporary Liquidity Guarantee Program (TLGP). This program was designed to assist
in the stabilization of the nation’s financial system. Under the Transaction Account
Guarantee (TAG) program, a component of the TLGP, the FDIC guarantees all funds
held in qualifying noninterest-bearing transaction accounts at participating insured
depository institutions. Effective June 22, 2010, an amendment to 12 CFR 370, in part,
extended the TAG program until December 31, 2010.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
52
Notes to Financial Statements
Investments—The County’s investments at June 30, 2010, were as follows:
Credit risk—The County’s formal policy is to limit its portfolio to investments with the
top rating issued by nationally recognized statistical rating organizations. As of June 30,
2010, credit risk for the County’s investments was as follows:
Custodial credit risk—For an investment, custodial credit risk is the risk that, in the
event of the counterparty’s failure, the County will not be able to recover the value of its
investments or collateral securities that are in the possession of an outside party. The
County’s formal policy stipulates that securities that are held in a custody or
safekeeping account must be held under the name of Navajo County or Navajo County
Treasurer. At June 30, 2010, the County had $1,934,544 of U.S. Treasury money
market funds that were uninsured and held by the counterparty not in the County’s
name and $15,686,278 of repurchase agreements (secured by federal agency
securities) that were uninsured and held by the counterparty’s trust department or agent
not in the County’s name.
Investment Type Amount
U.S. agency securities $60,481,830
Repurchase agreements 15,686,278
Corporate bonds 5,000,000
Bank notes 3,000,000
U.S. Treasury money market funds 1,934,544
$86,102,652
Investment Type Rating Rating Agency Amount
U.S. agency securities AAA Standard and Poor’s $36,785,760
U.S. agency securities AAAe Standard and Poor’s 23,696,070
Repurchase agreements Aaa Moody’s 15,686,278
Corporate bonds AAA Standard and Poor’s 5,000,000
Bank notes AAA Standard and Poor’s 3,000,000
U.S. Treasury money market funds AAAm Standard and Poor’s 1,934,544
$86,102,652
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
53
Notes to Financial Statements
Concentration of credit risk—The County’s formal policy stipulates that the County
will diversify the investment portfolio by limiting investments to avoid over-concentration
in securities from a specific issuer, excluding obligations issued or
guaranteed by the United States or any of the senior debt of its agencies or
sponsored agencies. The County had investments at June 30, 2010, of 5 percent or
more in Federal Home Loan Bank, Federal National Mortgage Association (including
repurchase agreements), Federal Home Loan Mortgage Corporation, and General
Electric Capital Corporation bond. These investments were 37.57 percent, 34.99
percent, 15.91 percent and 5.81 percent, respectively, of the County’s total
investments.
Interest rate risk—The County’s formal policy is to purchase a combination of short-,
medium-, and long-term investments such that maturities occur evenly over time as
necessary to provide the cash flow needed for operations. At June 30, 2010, the
County had the following investments in debt securities:
Investment Type Amount Weighted Average
Maturity (In Years)
U.S. agency securities $60,481,830 1.953
Repurchase agreements 15,686,278 .003
Corporate bonds 5,000,000 .523
Bank notes 3,000,000 1.923
U.S. Treasury money market funds 1,934,544 .003
$86,102,652
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
54
Notes to Financial Statements
At June 30, 2010, $23,758,931 of the investments in U.S agency securities and
$3,000,000 of investments in bank notes were considered to be highly sensitive to inter-est
rate changes:
U.S. agency step-up securities – On specified dates, the issuer can
call the security. If the security is not called, the interest rate is
increased by a specified amount. Prevailing interest rates may
increase faster than the increase in the coupon interest rate. $ 23,758,931
Bank note floating rate security – The coupon rate is tied to the
London Interbank Offered Rate plus a fixed basis point amount
which resets quarterly. The issuer can call the security on a
specified date, or if the security is not called, the interest rate is reset
at a specified amount. Prevailing interest rates may increase faster
than the increase in the coupon interest rate.
3,000,000
Total $ 26,758,931
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
55
Notes to Financial Statements
A reconciliation of cash, deposits, and investments to amounts shown on the
Statements of Net Assets follows:
Cash, deposits, and investments:
Note 4 - Due from Other Governments
Amounts due from other governments at June 30, 2010, include $957,586 in state and
county sales taxes, $410,931 in vehicle license taxes from the State of Arizona,
$703,804 in state-shared revenue from highway user taxes, and $2,129,766 in various
grants from the state and federal governments.
Cash on hand $ 53,020
Amount of deposits 63,358,846
Amount of investments 86,102,652
Total $ 149,514,518
Governmental
Activities
Investment
Trust
Funds
Agency
Funds
Total
Cash and investments
$37,853,647
$105,297,219
$4,434,108
$147,584,974
Cash and investments held
by trustee
1,276,107
1,276,107
Restricted assets—cash
and investments held by
trustee 653,437
653,437
Total
$39,783,191
$105,297,219
$4,434,108
$149,514,518
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
56
Note 5 - Capital Assets
Capital asset activity for the year ended June 30, 2010, was as follows:
Balance
July 1, 2009
Increases
Decreases
Balance
June 30, 2010
Governmental activities:
Capital assets not being depreciated:
Land $ 5,439,671 $ 30,000 $ - $ 5,469,671
Construction in progress 6,524,469 2,721,938 2,611,321 6,635,086
Total capital assets not being
depreciated
11,964,140
2,751,938
2,611,321
12,104,757
Capital assets being depreciated:
Buildings and improvements 32,353,226 11,456 - 32,364,682
Infrastructure 73,042,113 1,065,396 930,675 73,176,834
Machinery and equipment 25,283,610 551,167 841,817 24,992,960
Total 130,678,949 1,628,019 1,772,492 130,534,476
Less accumulated depreciation for:
Buildings and improvements 12,842,016 971,815 - 13,813,831
Infrastructure 27,906,846 2,318,644 400,668 29,824,822
Machinery and equipment 19,055,693 2,131,088 841,817 20,344,964
Total 59,804,555 5,421,547 1,242,485 63,983,617
Total capital assets being
depreciated, net
70,874,394
(3,793,528)
530,007
66,550,859
Governmental activities capital
assets, net
$ 82,838,534
$(1,041,590)
$3,141,328
$ 78,655,616
Notes to Financial Statements
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
57
Notes to Financial Statements
Depreciation expense was charged to functions as follows:
Governmental activities:
General government $ 977,546
Public safety 1,129,236
Highways and streets 2,965,295
Health and welfare 101,123
Culture and recreation 6,474
Education 241,873
Total governmental activities depreciation expense $5,421,547
Note 6 - Construction and Other Significant Commitments
The County had major contractual commitments related to various capital projects at
June 30, 2010, for the construction of roads and bridges. At June 30, 2010, the County
had spent $6,635,086 on these projects and had remaining contractual commitments
with contractors of $4,763,487. These projects are being primarily financed from
revenue sources of the Public Works/HURF and Flood Control District Funds and
revenue bond monies.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
58
Notes to Financial Statements
Note 7 - Long-Term Liabilities
The following schedule details the County’s long-term liability and obligation activity
for the year ended June 30, 2010:
Revenue bonds—The County has issued revenue bonds that are generally callable
with interest payable semiannually. The bonds were issued to acquire a new regional
county service center in Show Low, to construct a new county administrative building
in Heber-Overgaard, and to make improvements to the water facility and electrical
system at the county complex.
Balance
July 1, 2009
Additions
Reductions
Balance
June 30, 2010
Due within
1 year
Governmental activities
Revenue bonds payable $6,600,000 $ - $ 335,000 $ 6,265,000 $ 350,000
Certificates of participation
payable 5,340,000 - 310,000 5,030,000 330,000
Special assessment debt with
governmental commitment
1,702,213
-
185,106
1,517,107
180,117
Capital leases payable 53,687 - 28,310 25,377 25,377
Landfill closure and post-closure
care costs payable
11,591
-
724
10,867
724
Compensated absences
payable 2,399,835 2,029,677 1,938,672 2,490,840 1,950,252
Total governmental
activities long-term
liabilities $16,107,326
$2,029,677 $2,797,812 $15,339,191 $2,836,470
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
59
Notes to Financial Statements
Revenue bonds outstanding at June 30, 2010, were as follows:
The following schedule details debt service requirements to maturity for the
County’s revenue bonds payable at June 30, 2010:
The County has pledged a portion of its general county sales tax revenues toward
the payment of debt related to revenue bonds outstanding at June 30, 2010. At June
30, 2010, pledged revenues totaled $8,103,694, consisting of $6,265,000 for
principal and $1,838,694 for interest. The amount of $575,573, or 7.10 percent of
total pledged revenues, was required to cover current-year debt service. Future
principal and interest payments are expected to require less than 4% of pledged
sales tax revenues. Future pledged revenues required to pay all remaining debt
service for revenue bonds through final maturity at July 1, 2024, is $8,103,694.
Governmental Activities
Principal Interest
Year ending June 30
2011 $ 350,000 $ 228,585
2012 370,000 215,985
2013 380,000 202,860
2014 385,000 189,473
2015 405,000 175,648
2016-20 2,255,000 648,615
2021-24 2,120,000 177,528
Total $6,265,000 $1,838,694
Description
Original
Amount
Maturity
Ranges
Interest
Rates
Outstanding
Principal
Navajo County Pledged
Revenue Obligations,
Series 2008
$6,600,000
2011 – 2024
3.50 – 4.00%
$6,265,000
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
60
Notes to Financial Statements
Certificates of participation—The County has issued certificates of participation
(COPs) that are generally noncallable with interest payable semiannually to finance the
construction of jail facilities. The original amount of certificates issued in prior years was
$7,320,000.
Certificates outstanding at June 30, 2010, were as follows:
The following schedule details debt service requirements to maturity for the County’s
certificates of participation payable at June 30, 2010:
Description
Original
Amount
Maturity
Ranges
Interest
Rates
Outstanding
Principal
Navajo County, Arizona Municipal
Property Corporation Jail
Facility COPs, Series 2000
$7,320,000
2010 – 2021
5.00 – 6.25%
$5,030,000
Governmental Activities
Principal Interest
Year ending June 30
2011 $ 330,000 $ 298,031
2012 355,000 278,100
2013 375,000 256,200
2014 400,000 232,950
2015 425,000 208,200
2016-20 2,530,000 606,319
2021 615,000 19,219
Total $5,030,000 $1,899,019
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
61
Notes to Financial Statements
Special assessment debt with governmental commitment—Special assessment
bonds are payable from assessments collected from property owners benefited by
the respective improvements. The special assessment districts pledged these
assessments to repay the principal amount of $ 2,103,874 in special assessment
bonds. The proceeds were used to finance the construction or improvement of
roads, water and wastewater systems, and community facilities. Total principal and
interest remaining to be paid on these bonds is $1,893,804, payable through July
2019. At June 30, 2010, pledged revenues totaled $1,893,804, consisting of
$1,517,107 for principal and $376,697 for interest. The amount of $255,735, or 13.5
percent of total pledged revenues, was required to cover current-year debt service.
Future principal and interest payments are expected to require 100 percent of
pledged special assessment revenues. Future pledged revenues required to pay all
remaining debt service for special assessment debt through final maturity at July 1,
2019, is $1,893,804. While there is no legal obligation for the County to further
secure the special assessment bonds of the districts below, the County has made a
moral commitment to take steps necessary to prevent default.
Special assessment bonds currently outstanding for governmental activities are as
follows:
Description
Amount of
Issue
Interest
Rates
Maturity
Ranges
Outstanding at
June 30, 2010
Sutter Drive $ 245,750 5.50% 2011-2016 $ 122,944
Scott's Pine Tract A 184,124 6.17% 2011-2017 88,638
Shumway Road 1,150,000 5.40% 2011-2017 825,000
Bucking Horse 524,000 5.75% 2011-2019 480,525
Total $2,103,874 $1,517,107
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
62
Notes to Financial Statements
Annual debt service requirements to maturity for the special assessment debt with
governmental commitment are as follows:
Compensated absences—Compensated absences are paid from various funds in
the same proportion that those funds pay payroll costs. During fiscal year 2010, the
County paid for compensated absences as follows: 65 percent from the General
Fund, 12 percent from the Public Works/HURF Fund, 1 percent from the Flood
Control District Fund, and 22 percent from the Other Governmental Funds.
Governmental Activities
Principal Interest
Year ending June 30
2011 $ 180,117 $ 83,934
2012 178,154 73,890
2013 186,154 63,994
2014 198,154 53,656
2015 216,154 42,663
2016-20 558,374 58,560
Total $1,517,107 $376,697
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
63
Notes to Financial Statements
Note 8 - Risk Management
Public entity risk pools—The County is exposed to various risks of loss related to
torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to
employees; and natural disasters; but was unable to obtain insurance at a cost it
considered to be economically justifiable. Therefore, the County joined and is covered
by two public entity risk pools: the Arizona Counties Property and Casualty Pool and the
Arizona Counties Workers’ Compensation Pool, which are described below.
The Arizona Counties Property and Casualty Pool is a public entity risk pool currently
composed of 11 member counties. The pool provides member counties catastrophic
loss coverage for risks of loss related to torts; theft of, damage to, and destruction of
assets; errors and omissions; and natural disasters; and provides risk management
services. Such coverage includes all defense costs as well as the amount of any
judgment or settlement. The County is responsible for paying a premium based on its
exposure in relation to the exposure of the other participants and a deductible of
$10,000 per occurrence for property claims and $50,000 per occurrence for liability
claims. The County is also responsible for any payments in excess of the maximum
coverage of $300 million per occurrence for property claims and $15 million per
occurrence for liability claims. However, lower limits apply to certain categories of
losses. A county must participate in the pool at least 3 years after becoming a member;
however, it may withdraw after the initial 3-year period. If the pool were to become
insolvent, the County would be assessed an additional contribution.
The Arizona Counties Workers’ Compensation Pool is a public entity risk pool currently
composed of 11 member counties. The pool provides member counties with workers’
compensation coverage, as required by law, and risk management services. The
County is responsible for paying a premium, based on an experience-rating formula,
that allocates pool expenditures and liabilities among the members.
The Arizona Counties Property and Casualty Pool and the Arizona Counties Workers’
Compensation Pool receive independent audits annually and an audit by the Arizona
Department of Insurance every 5 years. Both pools accrue liabilities for losses that have
been incurred but not reported. These liabilities are determined annually based on an
independent actuarial valuation.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
64
Notes to Financial Statements
June 30, 2010
On July 1, 2009, the County terminated the Navajo County Employee Benefit Trust
(NCEBT), which had been created to provide and administer a self-insured program for
employee health benefits. On that date, the County transferred the assets and liabilities
of the NCEBT, which was accounted for as an internal service fund, to the General Fund
as provided by A.R.S. §11-981. The County paid the NCEBT’s liabilities for reported but
unpaid claims and for claims incurred but not reported prior to July 1, 2009, from the
General Fund. These claims were paid as of June 30, 2010. Also on July 1, 2009,
Navajo County joined the Public Employers Health Pool (APEHP), formerly Verde Valley
Employee Benefit Pool, pursuant to A.R.S §11-952.01. APEHP is a consortium of
participating local governments that provides medical and dental insurance coverage to
its participants’ employees. In addition, APEHP is self-funded through an agreement
with participating members and APEHP administers the plan. The members’ employee
and employer contributions are paid to the pool to pay benefits and administrative
expenses. If the County withdraws from APEHP, it is responsible for its proportionate
share of any claims’ run out costs, including claims reported but not settled, claims
incurred but not reported, and administrative costs. If the APEHP were to terminate, the
County would be responsible for its proportionate share of any pool deficit.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
65
Notes to Financial Statements
Note 9 - Operating Leases
The County leases office space and land under the provisions of various long-term
lease agreements classified as operating leases for accounting purposes. Rental
expenditures under the terms of the operating leases were $94,088 for the year ended
June 30, 2010. The operating leases have remaining noncancelable terms from 1 to 15
years and provide renewal options. The future minimum payments required under the
operating leases at June 30, 2010, were as follows:
Governmental
Activities
Year ending June 30
2011
$ 71,426
2012
39,137
2013
31,486
2014
31,486
2015
31,486
2016 – 2020
123,000
2021 – 2025
123,000
Total minimum lease payments $451,021
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
66
Notes to Financial Statements
Note 10 - Pensions and Other Postemployment Benefits
Plan Descriptions—The County contributes to the four plans described below.
Benefits are established by state statute and the plans generally provide retirement,
long-term disability, and health insurance premium benefits, including death and
survivor benefits. The retirement benefits are generally paid at a percentage, based on
years of service, of the retirees’ average compensation. Long-term disability benefits
vary by circumstance, but generally pay a percentage of the employee’s monthly
compensation. Health insurance premium benefits are generally paid as a fixed dollar
amount per month towards the retiree’s healthcare insurance premiums, in amounts
based on whether the benefit is for the retiree or for the retiree and his or her
dependents.
The Arizona State Retirement System (ASRS) administers a cost-sharing, multiple-employer
defined benefit pension plan; a cost-sharing, multiple-employer defined
benefit health insurance premium plan; and a cost-sharing, multiple-employer defined
benefit long-term disability plan that covers employees of the State of Arizona and
employees of participating political subdivisions and school districts. The ASRS is
governed by the Arizona State Retirement System Board according to the provisions of
A.R.S. Title 38, Chapter 5, Article 2.
The Public Safety Personnel Retirement System (PSPRS) administers an agent
multiple-employer defined benefit pension plan and an agent multiple-employer defined
benefit health insurance premium plan that covers public safety personnel who are
regularly assigned hazardous duty as employees of the State of Arizona and
participating political subdivisions. The PSPRS, acting as a common investment and
administrative agent, is governed by a five-member board, known as The Fund
Manager, and participating local boards according to the provisions of A.R.S. Title 38,
Chapter 5, Article 4.
The Corrections Officer Retirement Plan (CORP) administers an agent multiple-employer
defined benefit pension plan and an agent multiple-employer defined benefit
health insurance premium plan that covers state, county, and local correction officers;
dispatchers; and probation, surveillance, and juvenile detention officers. The CORP is
governed by The Fund Manager of PSPRS and participating local boards according to
the provisions of A.R.S. Title 38, Chapter 5, Article 6.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
67
Notes to Financial Statements
The Elected Officials Retirement Plan (EORP) administers a cost-sharing, multiple-employer
defined benefit pension plan and a cost-sharing, multiple-employer defined
benefit health insurance premium plan that covers State of Arizona and county elected
officials and judges, and elected officials of participating cities. The EORP is governed
by The Fund Manager of PSPRS according to the provisions of A.R.S. Title 38,
Chapter 5, Article 3. Because the health insurance premium plan benefit of the EORP
is not established as a formal trust, the EORP is reported in accordance with GASB
Statement No. 45 as an agent multiple-employer defined benefit plan. Accordingly, the
disclosures that follow reflect the EORP as if it were an agent multiple-employer
defined benefit plan.
Each plan issues a publicly available financial report that includes its financial
statements and required supplementary information. A report may be obtained by
writing or calling the applicable plan.
Funding Policy—The Arizona State Legislature establishes and may amend active
plan members’ and the County’s contribution rates for the ASRS, PSPRS, CORP, and
EORP.
Cost-sharing plans—For the year ended June 30, 2010, active ASRS members were
required by statute to contribute at the actuarially determined rate of 9.4 percent (9.0
percent for retirement and 0.4 percent long-term disability) of the members’ annual
covered payroll and the County was required by statute to contribute at the actuarially
determined rate of 9.4 percent (8.34 percent for retirement, 0.66 percent for health
insurance premium, and 0.4 percent for long-term disability) of the members’ annual
covered payroll.
ASRS PSPRS, CORP, and EORP
3300 North Central Avenue 3010 East Camelback Road, Suite 200
P.O. Box 33910 Phoenix, AZ 85016-4416
Phoenix, AZ 85067-3910 (602) 255-5575
(602) 240-2000 or 1-800-621-3778
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
68
Notes to Financial Statements
The County’s contributions for the current and 2 preceding years, all of which were
equal to the required contributions, were as follows:
Agent plans—For the year ended June 30, 2010, active PSPRS members were
required by statute to contribute 7.65 percent of the members’ annual covered payroll
and the County was required to contribute 21.11 percent, the aggregate of which is the
actuarially required amount. The health insurance premium portion of the contribution
rate was actuarially set at 0.81 percent of covered payroll. Active CORP members
were required by statute to contribute 8.41 percent of the members’ annual covered
payroll. In addition, the County was required to contribute 6.96 percent. The aggregate
of the members’ and the County’s contributions is the actuarially required amount. The
health insurance premium portion of the contribution rate was actuarially set at 0.53
percent of covered payroll. Active EORP members were required by statute to
contribute 7.00 percent of the members’ annual covered payroll; and the County was
required to remit a designated portion of certain court fees plus additional contributions
at the actuarially determined rate of 14.25 percent of the members’ annual covered
payroll. The health insurance premium portion of the contribution rate was actuarially
set at 1.89 percent of covered payroll.
Actuarial methods and assumptions—The contribution requirements for the year
ended June 30, 2010, were established by the June 30, 2008, actuarial valuations, and
those actuarial valuations were based on the following actuarial methods and
assumptions.
Health Benefit Long-Term
Retirement Fund Supplement Fund Disability Fund
Year ended June 30
2010 $1,506,523 $119,282 $72,330
2009 1,478,102 177,573 92,498
2008 1,402,691 182,620 87,106
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
69
Notes to Financial Statements
Actuarial valuations involve estimates of the value of reported amounts and
assumptions about the probability of events in the future. Amounts determined
regarding the funded status of the plans and the annual required contributions are
subject to continual revision as actual results are compared to past expectations and
new estimates are made. The required schedule of funding progress presented as
required supplementary information provides multiyear trend information that shows
whether the actuarial value of the plans’ assets are increasing or decreasing over time
relative to the actuarial accrued liability for benefits.
Projections of benefits are based on 1) the plans as understood by the County and
plans’ members and include the types of benefits in force at the valuation date, and 2)
the pattern of sharing benefit costs between the County and plans’ members to that
point. Actuarial calculations reflect a long-term perspective and employ methods and
assumptions that are designed to reduce short-term volatility in actuarial accrued
liabilities and the actuarial value of assets. The significant actuarial methods and
assumptions used are the same for all plans and related benefits (unless noted), and
the actuarial methods and assumptions used to establish the fiscal year 2010
contribution requirements, are as follows:
Actuarial valuation date June 30, 2008
Actuarial cost method Projected unit credit
Amortization method Level percent closed for unfunded actuarial accrued
liability, open for excess
Remaining amortization period 28 years for unfunded actuarial accrued liability, 20
years for excess
Asset valuation method Smoothed market value
Actuarial assumptions:
Investment rate of return 8.50%
Projected salary increases 5.50%-8.50% for PSPRS and CORP; 5.00% for
EORP
includes inflation at 5.50% for PSPRS and CORP; 5.00% for EORP
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
70
Notes to Financial Statements
Annual Pension/OPEB Cost—The County’s pension/OPEB cost for the agent plans
for the year ended June 30, 2010, and related information follows:
PSPRS CORP EORP
Health Health Health
Pension Insurance Pension Insurance Pension Insurance
Annual pension/
OPEB costs $413,594 $16,032 $122,623 $10,107 $193,294 $29,557
Contributions made 413,594 16,032 122,623 10,107 193,294 29,557
Trend Information—Annual pension and OPEB cost information for the current and 2
preceding years follows for each of the agent plans.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
71
Notes to Financial Statements
Plan
Year Ended
June 30
Annual Pension/
OPEB Cost
Percentage of
Annual Cost
Contributed
Net Pension/OPEB
Obligation
PSPRS
Pension 2010 $413,594 100% $0
Health insurance 2010 16,032 100% 0
Pension 2009 475,483 100% 0
Health insurance 2009 18,618 100% 0
Pension 2008 334,908 100% 0
Health insurance 2008 11,838 100% 0
CORP
Pension 2010 122,623 100% 0
Health insurance 2010 10,107 100% 0
Pension 2009 108,232 100% 0
Health insurance 2009 9,207 100% 0
Pension 2008 68,860 100% 0
Health insurance 2008 8,514 100% 0
EORP
Pension 2010 193,294 100% 0
Health insurance 2010 29,557 100% 0
Pension 2009 252,214 100% 0
Health insurance 2009 14,585 100% 0
Pension 2008 178,061 100% 0
Health insurance 2008 15,858 100% 0
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
72
Notes to Financial Statements
Funded Status—The funded status of the plans as of the most recent valuation date,
June 30, 2010, along with the actuarial assumptions and methods used in those
valuations follow. The EORP, by statute, is a cost-sharing plan. However, because of its
statutory construction, in accordance with GASB Statement No. 43, paragraphs 5 and
41, the EORP is reported for such purposes as an agent multiple-employer plan. The
Fund Manager obtains an actuarial valuation for the EORP on its statutory basis as a
cost-sharing plan and, therefore, actuarial information for the County, as a participating
government, is not available.
PSPRS CORP
Pension
Health
Insurance
Pension
Health
Insurance
Actuarial accrued liability (a) $11,424,640 $265,433 $2,580,501 $113,737
Actuarial value of assets (b) 6,141,516 - 2,789,103 -
Unfunded actuarial accrued liability
(funding excess) (a) – (b)
5,283,124
265,433
(208,602)
113,737
Funded ratio (b)/(a) 53.8% 0.0% 108.1% 0.0%
Covered payroll (c) $2,056,308 $2,056,308 $1,700,382 $1,700,382
Unfunded actuarial accrued liability (funding
excess) as a percentage of covered payroll ([(a)
- (b)]/(c))
256.9%
12.9%
(12.3%)
6.7%
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
73
Notes to Financial Statements
The actuarial methods and assumptions used are the same for all plans and related
benefits, and for the most recent valuation date, are as follows:
Actuarial valuation date June 30, 2010
Actuarial cost method Projected unit credit
Amortization method Level percent closed for unfunded actuarial
accrued liability, open for excess
Remaining amortization period 26 years for underfunded, 20 years for overfunded
Asset valuation method 7-year smoothed market value
Actuarial assumptions:
Investment rate of return 8.50%
Projected salary increases 5.5–8.5% for PSPRS and CORP; 5.00% for EORP
includes inflation at 5.50% for PSPRS and CORP; 5.00% for EORP
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
74
Notes to Financial Statements
Note 11 - Interfund Balances and Activity
Interfund receivables and payables—Interfund balances at June 30, 2010, were as
follows:
The interfund balances resulted from time lags between the dates that (1) interfund
goods and services are provided or reimbursable expenditures occur, (2) transactions
are recorded in the accounting system, and (3) payments between funds are made.
All interfund balances are expected to be paid in one year.
Payable to
Payable from
General
Fund
Public
Works/
HURF
Fund
Other
Governmental
Funds
Total
General Fund - - $ 6,001 $ 6,001
Flood Control District Fund - $274,479 - 274,479
Other Governmental Funds
$2,426,916 -
250,991
2,677,907
Total
$2,426,916 $274,479 $256,992 $2,958,387
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
75
Notes to Financial Statements
Interfund transfers—Interfund transfers for the year ended June 30, 2010, were as
follows:
In addition to the above interfund transfers, the general fund transferred $380,236 to the
agency funds to correctly report balances held in an agency capacity. Further, transfers
between the general fund and internal service fund were for the closeout of the internal
service fund during the year.
Transfers are used to (1) move revenues from the fund that statute or budget requires to
collect them to the fund that statute or budget requires to expend them, (2) move receipts
restricted to debt service from the funds collecting the receipts to the debt service fund as
debt service payments are due, and (3) use unrestricted revenues collected in the General
Fund to finance various programs accounted for in other funds in accordance with
budgetary authorizations.
Transfers to
Transfer from
General
Fund
Public
Works/HURF
Fund
Other
Governmental
Funds
Total
Internal
Service
Fund
General Fund - $ 5,000 $1,783,697 $ 550,000 $ 2,338,697
Public Works/HURF
Fund $ 787,506 - - - 787,506
Flood Control District
Fund 190,756 137,240 - - 327,996
Other Governmental
Funds 706,457 - 2,248,710 - 2,955,167
Internal Service Fund 2,189,115 - - - 2,189,115
Total $3,873,834 $142,240 $4,032,407 $550,000 $8,598,481
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
76
Notes to Financial Statements
Note 12 - County Treasurer’s Investment Pool
Arizona Revised Statutes require community colleges, school districts, and other local
governments to deposit certain public monies with the County Treasurer. The
Treasurer has a fiduciary responsibility to administer those and the County’s monies
under his stewardship. The Treasurer invests, on a pool basis, all idle monies not
specifically invested for a fund or program. In addition, the Treasurer determines the
fair value of those pooled investments annually at June 30.
The County Treasurer’s investment pool is not registered with the Securities and
Exchange Commission as an investment company, and there is no regulatory
oversight of its operations. The pool’s structure does not provide for shares, and the
County has not provided or obtained any legally binding guarantees to support the
value of the participants’ investments.
The Treasurer allocates interest earnings to each of the pool’s participants.
Substantially, all deposits and investments of the County’s primary government are
included in the County Treasurer’s investment pool, except for $1,636,416 in deposits
and $1,929,544 of investments in U.S. Treasury money market funds. Therefore, the
deposit and investment risks of the Treasurer’s investment pool are substantially the
same as the County’s deposit and investment risks. See Note 3 for disclosure of the
County’s deposit and investment risks.
Details of each major investment classification follow:
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
77
Notes to Financial Statements
Investment Type
Principal
Interest
Rates
Maturities
Amount
U.S. agency securities $60,481,830 1.125% - 3.75% 07/10 – 06/15 $60,481,830
Repurchase agreements 15,686,278 .10% 07/10 15,686,278
Corporate bonds 5,000,000 1.625% 01/11 5,000,000
Bank notes 3,000,000 Variable 06/12 3,000,000
U.S. Treasury money
market funds
5,000 .02% N/A 5,000
A condensed statement of the investment pool’s net assets and changes in net assets
follows:
Statement of Net Assets
Assets $146,134,869
Liabilities 4,454,984
Net assets $141,679,885
Net assets held in trust for:
Internal participants $ 36,214,996
External participants 105,464,889
Total net assets held in trust $141,679,885
Statement of Changes in Net Assets
Total additions $366,074,117
Total deductions 356,860,473
Net increase 9,213,644
Net assets held in trust:
July 1, 2009 132,466,241
June 30, 2010 $141,679,885
78
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Comprehensive annual financial report
Year Ended June 30, 2010
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OTHER Required
supplementary information
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
80
Required Supplementary Information
Budgetary Comparison Schedule
General Fund
Original and
Final Budgeted Actual Variance with
Amounts Amounts Final Budget
Revenues:
Property taxes $ 6,317,367 $ 6,397,385 $ 80,018
Licenses and permits 589,821 454,494 (135,327)
Fines and forfeits 921,800 1,087,357 165,557
Intergovernmental 21,056,585 20,545,394 (511,191)
Charges for services 802,701 1,012,452 209,751
Investment earnings 124,282 76,000 (48,282)
Miscellaneous 620,488 519,338 (101,150)
Total revenues 30,433,044 30,092,420 (340,624)
Expenditures:
General government
Board of Supervisors/Administration 2,808,074 2,275,796 532,278
Buildings and Grounds 1,950,946 1,710,928 240,018
Elections 632,162 294,120 338,042
Planning and Zoning 539,246 435,071 104,175
Recorder 274,487 211,093 63,394
Voter Registration 201,383 176,344 25,039
Assessor 1,279,006 1,178,060 100,946
Information Technology 1,120,048 730,462 389,586
Treasurer 448,466 421,748 26,718
Personnel Commission 17,515 9,693 7,822
County-wide 1,903,854 1,541,156 362,698
Legal Defender 393,517 378,195 15,322
County Attorney 2,272,528 2,193,109 79,419
Superior Court 2,773,135 2,713,390 59,745
Public Defender 1,090,356 804,601 285,755
Clerk of the Court 1,302,297 1,116,734 185,563
Holbrook Justice Court 334,869 329,513 5,356
Winslow Justice Court 307,666 308,868 (1,202)
Snowflake Justice Court 378,674 372,915 5,759
Show Low Justice Court 287,204 280,262 6,942
Pinetop Justice Court 340,811 330,501 10,310
Kayenta Justice Court 104,227 106,896 (2,669)
Kayenta Constable 26,629 25,525 1,104
See accompanying note to budgetary comparison schedule.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
81
Required Supplementary Information
Budgetary Comparison Schedule
General Fund
(Continued)
Original and
Final Budgeted Actual Variance with
Amounts Amounts Final Budget
Pinetop Constable $ 46,913 $ 51,186 $ (4,273)
Snowflake Constable 28,672 28,686 (14)
Holbrook Constable 26,671 26,447 224
Winslow Constable 28,976 31,529 (2,553)
Show Low Constable 47,425 47,244 181
Total general government 20,965,757 18,130,072 2,835,685
Public safety
Juvenile Detention 1,072,529 1,052,456 20,073
Juvenile Probation 455,308 410,905 44,403
Adult Probation 587,219 529,997 57,222
Jail Operations 6,832,252 5,370,488 1,461,764
Sheriff 6,093,401 4,862,526 1,230,875
Total public safety 15,040,709 12,226,372 2,814,337
Health and welfare
Public Fiduciary 447,795 389,820 57,975
Indigent Health 3,398,400 2,881,989 516,411
Total health and welfare 3,846,195 3,271,809 574,386
Education
School Superintendent 327,592 323,717 3,875
Capital outlay
Capital outlay 500,000 80,143 419,857
Construction projects 500,000 1,532 498,468
Total capital outlay 1,000,000 81,675 918,325
See accompanying note to budgetary comparison schedule.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
82
Required Supplementary Information
Budgetary Comparison Schedule
General Fund
(Continued)
Original and
Final Budgeted Actual Variance with
Amounts Amounts Final Budget
Contingency $ 4,000,000 $ - $ 4,000,000
Total expenditures 45,180,253 34,033,645 11,146,608
Excess (deficiency) of revenues
over expenditures (14,747,209) (3,941,225) 10,805,984
Other financing sources (uses):
Sale of capital assets - 95,036 95,036
Transfers in 5,491,534 3,873,834 (1,617,700)
Transfers out (2,595,249) (2,718,933) (123,684)
Total other financing sources and uses 2,896,285 1,249,937 (1,646,348)
Net change in fund balances (11,850,924) (2,691,288) 9,159,636
Fund balances, July 1, 2009 11,850,924 10,433,374 (1,417,550)
Fund balances, June 30, 2010 $ - $ 7,742,086 $ 7,742,086
See accompanying note to budgetary comparison schedule.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
83
Original and
Final Budgeted Actual Variance with
Amounts Amounts Final Budget
Revenues:
Intergovernmental $ 13,179,750 $ 15,032,384 $ 1,852,634
Charges for services - 39,249 39,249
Investment earnings 201,000 81,289 (119,711)
Miscellaneous 216,000 235,037 19,037
Total revenues 13,596,750 15,387,959 1,791,209
Expenditures:
Highways and streets 18,080,565 9,888,985 8,191,580
Total expenditures 18,080,565 9,888,985 8,191,580
Excess (deficiency) of revenues
over expenditures (4,483,815) 5,498,974 9,982,789
Other financing sources (uses):
Sale of capital assets - 20,201 20,201
Transfers in - 142,240 142,240
Transfers out (787,506) (787,506) -
Total other financing sources and uses (787,506) (625,065) 162,441
Net change in fund balances (5,271,321) 4,873,909 10,145,230
Fund balances, July 1, 2009 5,271,321 7,516,396 2,245,075
Increase in reserve for inventories - 41,280 41,280
Fund balances, June 30, 2010 $ - $ 12,431,585 $ 12,431,585
See accompanying note to budgetary comparison schedule.
Required Supplementary Information
Budgetary Comparison Schedule
Public Works/HURF Fund
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
84
Required Supplementary Information
Budgetary Comparison Schedule
Flood Control District Fund
Original and
Final Budgeted Actual Variance with
Amounts Amounts Final Budget
Revenues:
Property taxes $ 2,695,827 $ 2,742,386 $ 46,559
Investment earnings 154,753 66,694 (88,059)
Total revenues 2,850,580 2,809,080 (41,500)
Expenditures:
Public safety 7,426,697 817,477 6,609,220
Total expenditures 7,426,697 817,477 6,609,220
Excess (deficiency) of revenues
over expenditures (4,576,117) 1,991,603 6,567,720
Other financing sources (uses):
Transfers out (190,756) (327,996) (137,240)
Total other financing sources and uses (190,756) (327,996) (137,240)
Net change in fund balances (4,766,873) 1,663,607 6,430,480
Fund balances, July 1, 2009 4,766,873 6,937,255 2,170,382
Fund balances, June 30, 2010 $ - $ 8,600,862 $ 8,600,862
See accompanying note to budgetary comparison schedule.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
85
Note 1 - Budgeting and Budgetary Control
A.R.S. requires the County to prepare and adopt a balanced budget annually for each
governmental fund. The Board of Supervisors must approve such operating budgets on
or before the third Monday in July to allow sufficient time for the legal announcements
and hearings required for the adoption of the property tax levy on the third Monday in
August. A.R.S. prohibits expenditures or liabilities in excess of the amounts budgeted.
Expenditures may not legally exceed appropriations at the department level. In certain
instances, transfers of appropriations between departments or from the contingency
account to a department may be made upon the Board of Supervisors’ approval. With
the exception of the General Fund, each fund includes only one department.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
86
Required Supplementary Information
Schedule of Agent Retirement Plans’ Funding Progress
Public Safety Personnel Retirement System
Actuarial
Valuation Date
Actuarial
Value of
Plan
Assets
(a)
Actuarial
Accrued
Liability
(b)
Funding
(Liability)
Excess
(a-b)
Funded
Ratio
(a/b)
Annual
Covered
Payroll
(c)
Unfunded
Liability as
Percentage
of Covered
Payroll
([a-b]/c)
Pension
6/30/10 $6,141,516 $11,424,640 $(5,283,124) 53.8 $2,056,308 256.9%
Health Insurance
6/30/10 - 265,433 (265,433) 0.0 2,056,308 12.9
Pension
6/30/09 6,326,218 10,930,809 (4,604,591) 57.9 2,098,902 219.4
Health Insurance
6/30/09 - 272,996 (272,996) 0.0 2,098,902 13.0
Pension
6/30/08 5,911,599 9,957,770 (4,046,171) 59.4 2,033,947 198.9
Health Insurance
6/30/08 - 372,652 (372,652) 0.0 2,033,947 18.3
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
87
Required Supplementary Information
Schedule of Agent Retirement Plans’ Funding Progress
Corrections Officer Retirement Plan
Actuarial
Valuation Date
Actuarial
Value of
Plan
Assets
(a)
Actuarial
Accrued
Liability
(b)
Funding
(Liability)
Excess
(a-b)
Funded
Ratio
(a/b)
Annual
Covered
Payroll
(c)
Unfunded
Liability as
Percentage
of Covered
Payroll
Pension
6/30/10 $2,789,103 $2,580,501 $208,602 108.1% $1,700,382 N/A
Health Insurance
6/30/10 - 113,737 (113,737) 0.0 1,700,382 6.7%
Pension
6/30/09 2,583,339 2,363,977 219,362 109.3 $1,955,474 N/A
Health Insurance
6/30/09 - 115,931 (115,931) 0.0 1,955,474 5.9
Pension
6/30/08 2,100,462 1,948,603 151,859 107.8 1,743,730 N/A
Health Insurance
6/30/08 - 80,646 (80,646) 0.0 1,743,730 4.6
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
88
Required Supplementary Information
Schedule of Agent Retirement Plans’ Funding Progress
Note 1 - Actuarial Information Available
The EORP, by statute, is a cost-sharing plan. However, because of its statutory
construction, in accordance with GASB Statement No. 43, paragraphs 5 and 41, the
EORP is reported for such purposes as an agent multiple-employer plan. The Fund
Manager obtains an actuarial valuation for the EORP on its statutory basis as a cost-sharing
plan and, therefore, actuarial information for the County, as a participating
government, is not available.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
89
Nonmajor Governmental Funds
Special Revenue Funds
Administration Accounts for administration of a variety of programs including the
Assessor, Recorder and Treasurer surcharges, election services and
certain emergency service functions. Funding sources include service
related surcharges, federal and state grant funds, fees and local
government contributions.
County Attorney Accounts for various programs administered by the County Attorney
including Victim's Rights, Assistance and Restitution, Child Support
Enforcement, Anti-Racketeering, High-Intensity Drug Trafficking Area
and Bad Check. Funding sources include statutory fees and other
surcharges related to criminal prosecution, federal and state grants
and other user fees.
Courts Accounts for the processing of criminal cases as well as court
enhancement and record retention improvement funds. Funding
sources include statutory fees and other surcharges related to the
courts.
Environmental and Conservation Accounts for forest health programs. Funding is provided by federal
grants.
Housing Accounts for housing and community development programs.
Funding is provided by federal Community Development Block
Grants.
Library District Accounts for support services and materials provided to the County's
community libraries. Funding sources include federal and state grants
and a secondary property tax levy.
Probation Accounts for Adult and Juvenile Probation programs and services
provided in coordination with the State's Superior Court System.
Funding sources include state grants and fees paid by probationers.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
90
Nonmajor Governmental Funds
Special Revenue Funds
Public Defense Accounts for the public defense of criminal cases including public
defense enhancement funds. Funding sources include statutory fees
and other surcharges related to public defense.
Public Health Accounts for a variety of health service and education programs
including Bio-Terrorism, Women, Infants and Children (WIC), Nutrition,
Tobacco, Dental and contagious diseases. Funding sources include a
secondary property tax levy, federal and state grants, appropriations,
fees and private party contributions.
Recreation Accounts for operating costs of the White Mountain Lake Recreation
District. Funding sources are fees and secondary property taxes
assessed the benefiting property owners within the district boundaries.
Sheriff's Office Accounts for various jail and law enforcement programs including Jail
Enhancement, Drug Enforcement, Anti-Racketeering, High-Intensity
Drug Trafficking Area and Boating Safety. Funding sources include
federal and state grants.
Special Districts Accounts for operating costs for the Silver Creek, Bucking Horse,
Victory Heights, Hilltop Drive, Mountain View and North Whistle Stop
Loop County Road Improvement Districts. Funding sources are
secondary property taxes assessed the benefiting property owners
within the district boundaries.
Superintendent of Schools Accounts for educational services and programs including the
Rainbow Accommodation School, juvenile detention Hope School,
Special Services Consortium and unincorporated school district
territory. Funding sources include federal and state grants and
charges for services from local school districts.
Workforce Investment Act (WIA) Accounts for administration of the federal Workforce Investment Act
(WIA) program. Funding is from federal grants.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
91
Nonmajor Governmental Funds
Capital Projects Funds
General Government Accounts for construction of County buildings and improvements to
existing facilities.
Public Health Accounts for construction of the South County Public Health building.
Special Districts Accounts for construction costs of the Shumway Road and Roan
Circle County Road Improvement Districts. Funding sources are from
developer contributions and secondary property taxes assessed the
benefiting property owners within the district boundaries.
Debt Service Funds
General Government Account for the accumulation of resources for payment of principal and
interest on the 2000 Series Certificates of Participation jail construction
bonds and the 2008 Series Revenue Bonds for acquisition of property
and buildings at the Heber and Show Low complexes and for water
and electrical upgrades at the Holbrook complex. Funding for debt
service payments is annual appropriations
Jail Accounts for the accumulation of resources for the payment of
principal and interest on bonds and other debt instruments of the 2000
Series Certificates of Participation jail construction bonds. Funding for
debt service payments is annual appropriations
Special Districts Accounts for the accumulation of resources for the payment of
principal and interest on bonds and other debt instruments of the
Sutter Drive, Madison Lane, Scott's Pine Meadow, Shumway Road,
Bucking Horse, Wild Cat Way, Beaver Dam and North Whistle Stop
Loop County Road Improvement Districts. Funding sources are
secondary property taxes assessed the benefiting property owners
within the district boundaries.
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
92
County Environmental
Administration Attorney Courts and Conservation
Assets
Cash and investments $ 1,819,183 $ 1,470,570 $ 1,347,167 $ 175,581
Cash and investments held by trustee - - - -
Receivables:
Property taxes - - - -
Accrued interest 2,122 1,691 1,637 207
Other - - - -
Due from other funds 12,060 4,147 190,672 -
Due from other governments 30,950 149,610 - 15,000
Prepaid items - - - -
Restricted assets:
Cash and investments held by trustee - - - -
Total assets $ 1,864,315 $ 1,626,018 $ 1,539,476 $ 190,788
Liabilities and fund balance
Liabilities:
Accounts payable $ 107,658 $ 38,216 $ 36,906 $ 18,708
Accrued payroll & employee benefits 3,535 43,092 23,232 -
Due to other funds 273,152 382,699 290,046 26,554
Deferred revenues - - - -
Total liabilities 384,345 464,007 350,184 45,262
Fund balances:
Unreserved, reported in
Special revenue funds 1,479,970 1,162,011 1,189,292 145,526
Capital projects funds - - - -
Debt service funds - - - -
Total fund balances(deficits) 1,479,970 1,162,011 1,189,292 145,526
Total liabilities and fund balances $ 1,864,315 $ 1,626,018 $ 1,539,476 $ 190,788
Combining Balance Sheet
Nonmajor Governmental Funds
Special Revenue
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
93
Special Revenue
Library Public Public
Housing District Probation Defense Health
Assets
Cash and investments $ 2,855 $ 371,828 $ 675,376 $ 475,895 $ 830,553
Cash and investments held by trustee - - - - -
Receivables:
Property taxes - 33,448 - - 131,619
Accrued interest 3 442 829 553 3,269
Other - - - - -
Due from other funds - 4,132 37,226 - 1,533
Due from other governments 244,955 18,070 - - 183,568
Prepaid items - - - - -
Restricted assets: -
Cash and investments held by trustee - - - - -
Total assets $ 247,813 $ 427,920 $ 713,431 $ 476,448 $ 1,150,542
Liabilities and fund balance
Liabilities:
Accounts payable $ - $ 26,176 72,099 $ 13,537 $ 52,694
Accrued payroll & employee benefits - 7,811 68,067 930 79,569
Due to other funds 319,860 66,531 41,523 6,594 270,466
Deferred revenues - 24,545 - - 96,710
Total liabilities 319,860 125,063 181,689 21,061 499,439
Fund balances:
Unreserved, reported in
Special revenue funds (72,047) 302,857 531,742 455,387 651,103
Capital projects funds - - - - -
Debt service funds - - - - -
Total fund balances(deficits) (72,047) 302,857 531,742 455,387 651,103
Total liabilities and fund balances $ 247,813 $ 427,920 $ 713,431 $ 476,448 $ 1,150,542
Combining Balance Sheet
Nonmajor Governmental Funds
(Continued)
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
94
Special Revenue
Sheriff's Special Superintendent
Recreation Office Districts of Schools
Assets
Cash and investments $ 85,083 $ 864,319 $ 732,245 $ 2,922,206
Cash and investments held by trustee - - - -
Receivables:
Property taxes 37,691 - 6,061 -
Accrued interest 107 2,533 852 3,391
Other - - - -
Due from other funds - 2,260 - -
Due from other governments - 31,607 - 735,242
Prepaid items - - - 45,569
Restricted assets:
Cash and investments held by trustee - - - -
Total assets $ 122,881 $ 900,719 $ 739,158 $ 3,706,408
Liabilities and fund balance
Liabilities:
Accounts payable $ 12,181 $ 100,168 $ 1,201 $ 28,328
Accrued payroll & employee benefits - 3,289 - -
Due to other funds - 196,869 127,627 -
Deferred revenues 31,677 - 5,359 -
Total liabilities 43,858 300,326 134,187 28,328
Fund balances:
Unreserved, reported in
Special revenue funds 79,023 600,393 604,971 3,678,080
Capital projects funds - - - -
Debt service funds - - - -
Total fund balances(deficits) 79,023 600,393 604,971 3,678,080
Total liabilities and fund balances $ 122,881 $ 900,719 $ 739,158 $ 3,706,408
Combining Balance Sheet
Nonmajor Governmental Funds
(Continued)
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
95
Special Revenue
Workforce General Public Special
Investment Act Government Health Districts
Assets
Cash and investments $ 191,035 $ - $ - $ 215,872
Cash and investments held by trustee - - - -
Receivables:
Property taxes - - - -
Accrued interest 222 - - 251
Other - - - -
Due from other funds 4,962 - - -
Due from other governments - - - -
Prepaid items - - - -
Restricted assets:
Cash and investments held by trustee - - - -
Total assets $ 196,219 $ - $ - $ 216,123
Liabilities and fund balance
Liabilities:
Accounts payable $ 10,625 $ - $ - $ -
Accrued payroll & employee benefits 7,111 - - -
Due to other funds 372,247 122,528 - 17,263
Deferred revenues - - - -
Total liabilities 389,983 122,528 - 17,263
Fund balances:
Unreserved, reported in
Special revenue funds (193,764) - - -
Capital projects funds - (122,528) - 198,860
Debt service funds - - - -
Total fund balances(deficits) (193,764) (122,528) - 198,860
Total liabilities and fund balances $ 196,219 $ - $ - $ 216,123
Capital Projects
Combining Balance Sheet
Nonmajor Governmental Funds
(Continued)
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
96
Total
Nonmajor
General Special Governmental
Government Jail Districts Funds
Assets
Cash and investments $ - $ 427,561 $ 56,178 12,663,507
Cash and investments held by trustee 467,355 483,656 - 951,011
Receivables:
Property taxes - - 26,762 235,581
Accrued interest - 497 65 18,671
Other - - - 256,992
Due from other funds - - - 1,409,002
Due from other governments - - - 45,569
Prepaid items - - - -
Restricted assets:
Cash and investments held by trustee - 653,437 - 653,437
Total assets $ 467,355 $ 1,565,151 $ 83,005 $ 16,233,770
Liabilities and fund balance
Liabilities:
Accounts payable $ - $ - $ - 518,497
Accrued payroll & employee benefits - - - 236,636
Due to other funds - - 163,948 2,677,907
Deferred revenues - - 26,701 184,992
Total liabilities - - 190,649 3,618,032
Fund balances:
Unreserved, reported in
Special revenue funds - - - 10,614,544
Capital projects funds - - - 76,332
Debt service funds 467,355 1,565,151 (107,644) 1,924,862
Total fund balances(deficits) 467,355 1,565,151 (107,644) 12,615,738
Total liabilities and fund balances $ 467,355 $ 1,565,151 $ 83,005 $ 16,233,770
Debt Service
Combining Balance Sheet
Nonmajor Governmental Funds
(Continued)
Navajo County
Comprehensive annual financial report
Year Ended June 30, 2010
N
97
County Environmental
Administration Attorney Courts and Conservation
Revenues:
Property taxes $ - $ - $ - $ -
Licenses and permits - - - -
Fines and forfeits - 191,875 - -
Intergovernmental 1,194,271 1,497,632 445,680 195,574
Charges for services 203,412 69,510 554,732 -
Investment earnings 8,868 3,604 10,276 1,064
Special assessments - - - -
Contributions - - - -
Miscellaneous 57,752 133,934 9,491 18,941
Total revenues 1,464,303 1,896,555 1,020,179 215,579
Expenditures:
General government 430,625 1,945,698 898,972 -
Public safety 53,634 - - -
Highways and streets - - - -
Health and welfare - - - -
Culture and recreation - - - -
Education 645,715 - - -
Environmental and conservation - - - 237,032
Urban redevelopment and housing - - - -
Debt Service
Principal - - - -
Interest and other charges - - - -
Total expenditures 1,129,974 1,945,698 898,972 237,0